When planning or administering a Will, the term trustee often surfaces, yet many people are unsure of what it actually entails. While an executor winds up the estate and distributes the assets according to the Will, a trustee may have an ongoing role that can last years or even decades. They are responsible for managing assets held in a trust, which may be established for a variety of reasons. This comprehensive guide explores the role of a trustee in a Will under UK law, answering the questions trustees often ask and clarifying their duties, rights, and responsibilities.
A trustee is a person or organisation appointed to manage property or assets held in trust for the benefit of others, known as beneficiaries. The legal title to the trust assets vests in the trustee, but they hold it for the benefit of someone else, as governed by the terms of the Will and trust law.
This role is fiduciary, meaning trustees must always act in the best interests of the beneficiaries and adhere strictly to the legal obligations placed upon them.
Trustees are only appointed when a Will establishes a trust. Common examples include:
- Trusts for minors – where children inherit but are too young to manage their inheritance.
- Life interest trusts – often used in second marriages, allowing one person (usually a spouse) to benefit during their lifetime, with the remainder passing to others.
- Discretionary trusts – where trustees have the power to decide who benefits and when, typically used for vulnerable beneficiaries or tax planning.
- Disabled person's trusts – structured to protect means-tested benefits or provide lifelong care.
In all these scenarios, the trustee becomes the legal manager of those assets for the term of the trust.
Being a trustee is more than a ceremonial title. It comes with a range of ongoing legal and administrative responsibilities:
1. Administer the Trust According to the Will
Trustees must read and understand the Will thoroughly, ensuring they follow its terms exactly. If the Will says a beneficiary gets income from a fund for life, and capital to others later, that must be respected without deviation.
2. Act in the Best Interests of the Beneficiaries
Trustees must act loyally and avoid conflicts of interest. If there are multiple beneficiaries, they must act impartially, balancing the interests of, for example, a life tenant and the ultimate capital beneficiaries.
3. Invest Trust Assets Prudently
Unless the trust says otherwise, trustees have a duty to invest assets. The Trustee Act 2000 requires them to make investments as if they were managing their own affairs, with the goal of preserving and enhancing value. They must also review those investments regularly.
4. Maintain Accurate Records and Accounts
Trustees are expected to maintain proper records of income, expenditure, investments, and decisions made. Beneficiaries may request information and, in some cases, accounts. Transparency is key.
5. Distribute Income or Capital Where Appropriate
If the trust provides for income to be paid out (such as rent from a property or interest from investments), the trustee must ensure this is done correctly. In discretionary trusts, they must make informed and fair decisions based on the beneficiaries' circumstances.
"Can I say no to being a trustee?"
Yes, you can. Being a trustee is voluntary. If you've been named in a Will as a trustee and don't wish to act, you can renounce the role before taking any steps. Once you begin acting (even by accident), it becomes more complicated to step down.
"What if I don't understand the legal terms in the Will?"
Wills often include technical or legal jargon. It's essential to seek legal advice if you're unclear about your obligations or what the Will means. Misinterpreting the Will can result in breach of trust.
"Am I personally liable as a trustee?"
Yes, trustees can be held personally liable for financial losses resulting from breach of duty, even if unintentional. However, many Wills include indemnity clauses protecting trustees against honest mistakes.
Trustees can reduce risk by:
- Keeping good records
- Seeking professional advice
- Acting prudently and impartially
"Can I be paid as a trustee?"
Generally, non-professional trustees (such as family or friends) are not paid unless the Will specifically says so. Professional trustees (e.g., solicitors or accountants) may charge for their services if authorised by the Will or the beneficiaries.
"What if the beneficiaries disagree with me?"
Trustees may face disputes or disagreements among beneficiaries. As long as you act fairly, within the law, and in accordance with the trust, you're protected. However, mediation or legal advice may be necessary in contentious situations.
"How long will I be a trustee?"
This depends on the terms of the trust. It could be until a minor turns 18 or 21, until a life tenant dies, or potentially indefinitely in a discretionary trust. If you want to step down, the trust instrument or law may provide mechanisms to retire and appoint a replacement.
"Can there be more than one trustee?"
Yes, and often there are. The law requires a minimum of two trustees for trusts involving land. Multiple trustees can provide checks and balances in decision-making, but too many can slow down processes.
When the estate has been administered and it's time to start the trust, trustees should:
1. Obtain a copy of the Will and understand the trust provisions
2. Confirm the trust assets are correctly transferred to them
3. Register the trust with HMRC via the Trust Registration Service (TRS) if required
4. Open a dedicated trust bank account (not a personal account)
5. Obtain tax advice – trustees are responsible for reporting and paying tax on trust income
6. Create a record-keeping system
7. Arrange for valuation of assets (particularly if managing property or investments)
Trustees may have to deal with:
- Income tax on the income the trust receives (e.g., dividends, rent)
- Capital gains tax (CGT) on the sale of trust assets
- Inheritance tax (IHT), particularly in discretionary trusts on ten-year anniversaries or capital exits
Understanding trust taxation is vital. Getting advice from a tax advisor or solicitor experienced in trust administration is strongly recommended.
In discretionary trusts, trustees have significant flexibility. They can choose which beneficiaries receive income or capital, how much, and when. This power must be exercised carefully, taking into account:
- The needs and circumstances of each beneficiary
- The purpose of the trust
- The guidance (if any) provided in a letter of wishes
Discretion must be exercised fairly and not arbitrarily. Trustees should record their reasoning for key decisions in case they are later challenged.
If a trust holds property, trustees are responsible for managing it, which includes:
- Maintaining and insuring the property
- Letting it out if appropriate
- Keeping up with legal responsibilities, such as landlord obligations
- Deciding when (or whether) to sell it
It may also mean registering the property with the Land Registry in the names of the trustees.
Trustees should maintain detailed records, including:
- A copy of the Will and trust deed
- Minutes of trustee meetings
- Correspondence with beneficiaries
- Investment records and valuations
- Income and expenditure
- Tax returns and HMRC correspondence
These records not only help with administration but also protect trustees from liability if disputes arise.
Being a trustee is an important legal role that should not be taken lightly. It involves balancing legal, financial, and often emotional considerations. While many trustees are not legal professionals, they are expected to act with the diligence and care of one, making it essential to seek advice when needed.
For testators, choosing the right trustees is as important as deciding who should inherit. For trustees themselves, understanding the duties and responsibilities involved is the first step in fulfilling the role confidently and competently.
Whether you're a layperson asked to act as a trustee for a family trust, or a professional exploring the legal framework, always remember: a trustee's role is one of stewardship. It's about honouring the testator's wishes, protecting beneficiaries, and preserving assets for future generations.
If you're named as a trustee in a Will or are considering setting up a trust and need expert guidance, Premier Solicitors are here to help. Our experienced team can support you through every stage, from understanding your duties to managing trust assets and resolving disputes.
For more information, please call us on 01234 358 080 or visit our contact page to send an enquiry form.
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