InvestmentsSep 28 2021

What are the roles and responsibilities of trustees?

  • Explain trustees' duties and responsibilities
  • Identify which accounts and records must be retained for HMRC
  • Describe trustees' investment duties
  • Explain trustees' duties and responsibilities
  • Identify which accounts and records must be retained for HMRC
  • Describe trustees' investment duties
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Approx.30min
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CPD
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What are the roles and responsibilities of trustees?
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Any investments or properties that make up the trust fund should be in the name of the trustees.

Make sure property is insured

Where there is a property, trustees need to make sure it is insured and that the insurers are noting the trustees’ interests. They also need to arrange for periodic visits to ensure that the property is maintained and not becoming neglected or dilapidated.

If there is a life tenant (a beneficiary entitled to stay at the property), are they upholding any duties imposed under the trust, such as meeting the costs of repair and insurance?

Find out the tax treatment of the trust

Different trusts have different tax reporting obligations and are subject to different tax rates, depending on the wording of the settlement and the underlying beneficial interests. 

It is worth trustees obtaining advice about this, as it is their duty to deal with the tax compliance issues, or pay the financial penalties for failing to do so. 

If the trustees are unable to complete trust tax returns or keep up with the ongoing changes to tax regulations, they can delegate this function to a suitable professional, who can charge their services directly to the trust.

Investment duties

Trustees have wide investment powers through the Trustee Act 2000 (England and Wales); Charities and Trustee Investment (Scotland) Act 2005; and Trustee Act (Northern Ireland) 2001. This means that unless the trust deed restricts the type of investment, they can invest in any type of asset.

It is a fundamental duty of trustees to invest the trust fund in the beneficiaries’ interests – whether that is in terms of income or capital appreciation.

The trustees’ duty, in relation to investment, is to use their powers in the best interests of current and future beneficiaries. Trustees should also consider whether they have a duty to sell any part of the trust assets.

When choosing appropriate assets to invest in, the trustees must consider the purpose of the trust and the needs of the beneficiaries. They must then apply the standard investment criteria accordingly.

The criteria are the suitability to the trust of the investments, both in relation to the suitability of the kind of investment and the suitability of the particular investment, and the need for diversification of investments of the trust, in so far as is appropriate to the circumstances of the trust.

A trustee must occasionally review the investments and consider whether investments need to be varied, depending on the standard investment criteria.

Trustees can delegate the management of trust investments to a suitable professional, who can charge for their services directly to the trust. It is prudent to delegate the investment management function to reduce risk and provide diversification where appropriate.

Protecting the interests of beneficiaries

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