Trustee considerations

Trustees become the legal owners of the trust assets. With that comes a set of duties: to act in the beneficiaries' interests rather than their own, to keep to the terms of the deed, to keep proper records and accounts, to invest suitably, and to hold the balance fairly between beneficiaries whose interests pull in different directions. A trustee who gets those things wrong can be personally liable to the beneficiaries for the consequences.

The practical load is often underestimated. Depending on the trust and its assets, trustees may need to account for Income Tax and Capital Gains Tax on trust income and gains, deal with Inheritance Tax charges when assets enter or leave the trust and at ten-yearly intervals, and keep the entry on HMRC's Trust Registration Service current. Registration can apply even where no tax is payable, and some trusts are excluded, so the position should be checked rather than assumed. This can be complex, ongoing and costly work, and for some families the duties and the running costs are enough to make a trust unsuitable.

Then there is judgement. A discretionary trustee may have to decide who benefits and when, weigh a letter of wishes without treating it as an instruction, and be able to explain the decision afterwards — with the extent of those powers set by the governing terms rather than by the trustee. That is a different thing from being a supportive family friend, which is why appointing a relative without explaining the role is a practical risk worth avoiding.

Many arrangements use more than one trustee, and pairing a family member who understands the intention with a professional who understands the mechanics is a common approach — accepting that a professional trustee charges for acting. Whoever is chosen, the arrangement has to survive time: trustees move abroad, fall ill, fall out or die, so the governing terms should say who can appoint and remove trustees, and there should be a realistic answer to who takes over in twenty years.

Before accepting an appointment, it is fair to ask: what does this trust actually hold, who else is acting, what has been done so far, what is the annual cycle of returns and registration, who pays for professional help, and who could remove or replace me. Anyone appointing trustees should ask themselves the same questions on the beneficiaries' behalf, and ask the specialist to explain the duties to the proposed trustees directly.