As financial advisers, we often work with clients who hold assets in trust, typically cash or investments. These are assets that someone has chosen to gift, not directly to another person, but into a trust. The reasons for doing this vary, but there’s usually a common theme: control. A trust allows someone to make a gift while still retaining influence over how and when the asset is used, in accordance with the trust deed. This might be to protect the funds from third parties, to hold them until a beneficiary reaches a certain age, or simply to ensure the money is managed responsibly.
So, who actually has control? That’s where the trustees come in.
Trustees are the legal owners of the trust assets. They are responsible for managing those assets in line with the trust deed and for the benefit of the beneficiaries. The settlor, the person who created the trust, may also be a trustee, but this isn’t a requirement. One of the key conversations we often have with clients is about selecting suitable trustees. It’s essential that trustees are not only capable of making sound decisions, but also practically available. For example, someone who is rarely in the UK or out of touch with the beneficiaries may not be the best choice, even if they’re financially savvy.
Being a trustee can sound daunting, and rightly so. It’s a serious responsibility.
Trustees have a legal duty of care and must act in the best interests of the beneficiaries at all times. If things go wrong, there can be consequences. But when you break it down, the core responsibilities are clear:
- Manage the trust assets prudently. This can be delegated to professionals, such as financial advisers, but trustees remain accountable.
- Seek advice when needed, especially on investments, tax, and legal matters.
- Invest responsibly, balancing risk and growth potential in line with the trust’s objectives.
- Make distributions to beneficiaries as required by the trust deed.
- Keep records, register the trust with HMRC if necessary, and handle tax reporting.
- Above all, act in accordance with the trust deed and the law.
This is just a whistle-stop tour of what trusteeship involves. The actual duties can go much deeper, which leads to a common question: Is it too much for me to take on?
Many lay trustees feel uncertain about managing a trust without support. That’s where professional trustees come in. While they charge for their services, they bring expertise and peace of mind – ensuring the trust is run properly and all reporting obligations are met. It’s a cost that many find worthwhile. As financial advisers, we provide investment and financial planning advice for trust assets, but the instructions always come from the trustees. It’s a role that carries weight, and it shouldn’t be underestimated.
Do you know we offer a trustee review service?
If you are a trustee for an investment portfolio which is not actively reviewed on a regular basis, the portfolio could have drifted away from its original objectives. This is particularly important when it comes to risk; as asset classes grow at different rates, the risk profile of a portfolio can dramatically alter over time. When this happens, it leaves the trust open to unintentional levels of volatility- which may not be in the best interests of the beneficiaries.
At Three Counties, we are able to analyse a trust portfolio to evaluate the investments in terms of risk, volatility, growth, cost and, most importantly, suitability.
If you would like to know more, have a read here.
This article is intended as a brief guide to the subject matter and in no way constitutes advice or recommendation. The article is based on our understanding of current and proposed legislation which could be subject to change at any time. Specific financial, tax and legal advice should always be sought before taking any action.
