About this series of articles
This article is one in a series about how to write your last will and testament yourself.
This article explains the role of a trustee and the powers that one might be given.
What is a trustee?
A trustee is someone who is given legal responsibility to hold property in the best interest of or for the benefit of someone else. As the name implies the trustee acts under a trust to do what is best and to act in the interests of others (the beneficiaries) and not himself. The Law has always categorised the relationship of a trustee to a beneficiary as being one of utmost good faith.
There are many types of trust, but largely the duties of trustees are the same.
Appointing different trustees for specific tasks
A testator does not have to appoint his chosen executors also to be trustees of a trust.
For example, in considering a discretionary trust for grandchildren, it may be sensible to find young trustees, even though the testator may want specific other people to act as executors.
Another example of different trustees may arise if guardians are appointed for children.
It may be sensible to appoint the guardians as trustees only of a children’s trust. For more on this, read who to choose as executors, trustees and guardians.
Powers of a trustee
The Powers of trustees are set out in the Trustee Act 2000. The main purpose of the Act is to restrict what a trustee can do with the money and assets he controls. However, the powers may be too restrictive, as is, for most family run will trusts and there may be far more useful and productive tasks that trustees can do than investing in 'safe' assets such as 3% government bonds.
Of course, great care should be taken in deciding what your trustees can or cannot do. To avoid problems, lawyers have tended to word trust deeds in arcane and archaic language. It has also tended to induce a client to choose the solicitor as trustee because no-one else will understand the complex text. Today that is no longer necessary or helpful. A Net Lawman will sets out the trust management in menus of paragraphs drawn for understanding as well as legal force. You can choose exactly what you want.
In some circumstances trustees are appointed by the Court. In most cases however, they are appointed by you when you make a will or set up a trust for some other reason. Executors are trustees with a special task, namely the winding up of the estate.
It is usual for the executors to continue in office as trustees of a trust created by the will. It may not be possible even to identify the precise day that they took off their hats as executors and put on their trustees hats instead. (But HM Revenue and Customs will want a date!)
What powers do trustees have?
Powers granted can vary enormously
The powers that the Trustee Act 2000 gives trustees by default are fairly unspecific (so as to be suitable for most trusts). However, you can make powers as specific and narrow as you like. An example might be that your trustees cannot invest in the shares of any company diamond mining in a certain country.
We advise that you shouldn't be too restrictive - it simply isn't possible to manage your affairs from beyond the grave because there will be circumstances that you can't foresee. You need to give your trustees some flexibility so that they can carry out their role in the way that they think best. If you are too prescriptive and deadlock occurs, the most likely resolution will be by court order, which never comes cheaply.
However, you may have strong opinions on certain aspects of your estate (such as whether your spouse from a second marriage should be able to live in your matrimonial home). You could either restrict the power in the trust provisions (i.e. that trustees must not sell your house while your wife is alive), or you could express your intentions in a letter of intent. A letter of intent is not a legally binding document, but most trustees will follow your wishes in it.
Trust powers might cover many judgements such as:
- how an investment portfolio should be invested and diversified: whether certain types of assets (such as buy-to-let property) are allowed; what proportion of the value should be held in a certain type of asset;
- who is entitled to what and for how long;
- how certain assets are to be managed: whether a life tenant can install a new kitchen out of capital;
- whether to lend money to a beneficiary who has hit hard times.
Finer points of management
There may be other things that you specifically want to address in the powers.
- What if a trustee needs to delegate some of his management?
- Can they buy assets outside the UK?
- Can they use foreign trustees to administer assets in another country?
- How far is a trustee liable for their good ideas that go wrong?
- Do they have to attend meetings of companies in which the trust has shares?
- Do you want your trustees to avoid paying excessive inheritance tax?
The list could be endless.
Through the trust provisions, you decide when a child is entitled to income, and when to capital. You also decide to whom the money is paid - direct to the child, or to the parents or guardians.
We recommend that you read about the nil rate band, discretionary trusts and the 2-year concession next.
We believe that everyone should make a will. We provide some of our more straightforward ones free with no catches or conditions. Download one of will templates. We offer nine templates in total that together cover thousands of possible variations of wishes. We can also help you find which type of will suits you best.