“Trust, but verify”
Ronald Reagan (1911-2004)
Three key groups of people form a trust fund. For any kind of trust to work, each individual in each group should know their role, responsibilities, options and obligations from the start.
With the level of responsibility assigned to a trustee, careful consideration of who is appointed is likely to influence whether a trust fund performs to a suitable and satisfactory standard.
- Settlors should appoint one or more trustees.
- Typically, between 2 and 5 trustees are appointed.
- A settlor may appoint themselves as trustee (many often do).
- Any trustee should be at least 18 years of age and of sound mind.
- Trustees are obliged to act in the best interests of the trust and any beneficiaries. Their integrity must be indisputable.
- Trustees should be responsible and think long-term. Instead of acting in haste they should fully consider all implications of any decisions made.
- Trustees should be reliable: settlors should ensure that any trustee is likely to be around when decisions on the trust fund are required.
- Family members who are trustees are normally required to avoid tension. Any conflict of interest could impact on the ability of the trustee to act in accordance with the strict Trustee Act 2000.
- At least one trustee should be “independent” to avoid any doubt that the settlor retains full control over the trust assets.
- While the responsibilities at hand are safer with a suitable trustee, circumstances can change.
This list is not exhaustive but offers some guidance on the kind of people a settlor should consider for the role of trustee.
Understanding earlier on who is involved in a trust fund and each key role’s responsibilities can help ensure that the creation and running of the trust fund is a much smoother process.
Courtiers can help individuals and businesses with the entire trust fund process, from identifying a suitable model, to the drafting of the trust deed. Settlors do not need to tackle everything alone.
When considering the use of trusts within overall financial planning, knowing which questions to ask is an ideal starting point and this is covered in my previous article, A Question of Trust(s).
The next trusts article will look at the various types of trusts which can be set up. Subscribe to COURTIERS News if you’d like an email when this is released.
To find out more about trusts or explore your options in more detail, please speak to your COURTIERS Adviser.
Phil Greenwood DipPFS
Head of Technical Support (Henley Office)
Tax treatment depends on individual circumstances and may be subject to change in the future.
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