Will Trustees have an important role to play and choosing them is not an easy task, as we explain here:
Most of us will never need to have our money managed by a trustee. We will own and manage our money, decide what and when to buy and sell and how to spend the proceeds of sale. Even when we inherit money, the executors of the will cannot withhold our inheritance from us after the administration is finished.
What is a Will Trust?
For some people, their inheritance must be delayed. For example, following a second marriage, there may be a surviving second spouse who needs to be provided for. If this is the case, the will may set up a “Will Trust” where the surviving second spouse is given the right to live in the home, or the right to the income from the estate, called a “Life Interest”. This will take priority to the interest of the adult family of the first marriage (“the Remaindermen”), resulting in a delay in the distribution of the estate, sometimes for many years until the spouse (“the Life Tenant”) dies.
Why is the choice of Will Trustees so important?
During the Life Interest of the Life Tenant, many decisions and judgements will have to be made (for example) about the best assets to hold in the trust, when to buy and sell them, and whether the priority should be to invest for high income yield or for capital growth. Trustees are under a duty to maintain a balance between the interests of the Life Tenant and the Remainderman. Other decisions, such as when and how if at all to release capital, can make the trustees unpopular with either the Life Tenant or the Remaindermen. Sound trustee decisions can often result in all the beneficiaries feeling disgruntled. The choice of who is to be a trustee is central to the smooth operation of the trust. Not only must the decision as to who to appoint be right on the day the will is made. Crucially, it must be right on the date of death when the trust commences. So constant review of the identity and fitness for purpose of the trustees is of paramount priority.
Professional or Lay Trustees?
Whether you appoint professional or lay trustees is a matter of personal preference. If you appoint a firm of solicitors, this will still be valid if your individual solicitor has retired, but you may then get saddled with another individual in the firm who the family cannot abide. People often worry about the cost of appointing a professional trustee. But this fear is very often groundless because lay trustees will need to take professional advice which must be paid for. If you do appoint a professional trustee, or a firm of solicitors or trust management company as trustee, you need to keep this under constant review because if the firm merges with another firm of solicitors or closes down, the appointment may fail. If you appoint an individual trusted adviser as a trustee, he may die, retire, disappear or simply decide he does not want the responsibility of a trusteeship by the time you have died. And if the appointment of your professional trustee fails, what does this do to the balance of power between the remaining trustees you have appointed. Will they know what they are expected to do and do they get on with each other?
Should you appoint a friend or member of the family?
It is not an easy job being a trustee. The job can be very time consuming, the responsibility is personal and there is no limited liability for an executor or trustee, unless specifically agreed. Also, for a lay trustee, the job is unpaid. Then there are the beneficiaries. Even where the trustees are well advised and protected, a trustee very often has to make decisions holding the balance between one beneficiary and another and this can leave a trustee very unpopular with all the beneficiaries. This can be particularly embarrassing for a long standing and trusted friend of the family.
Who has effective control of the trust?
Matters can be much more menacing for the family where for example, the professional trustee has died or retired between the date of the will and the date of death, leaving a sole family member as trustee with the power in the will to appoint additional trustees. Here, if the family member does not take advice, or if he or she receives partisan advice, the choice of additional trustees could result the balance between the Life Tenant and the Remaindermen being lost, with one side of the family being over represented and the other not represented at all.
How can you be sure the right people are in control?
The advice is to choose your trustees very carefully in the first place and don’t rush the decision. Give it as much thought as the actual terms of the trust itself. Then review that decision every year for example when you sign your tax returns or review your investments to ensure that your trustees remain fit for purpose. At Churchgates, we believe in appointing for each client, a single individual who is your first port of call, whose job it is to help you plan your legal, tax and financial affairs. All this expertise provided under one roof, so the chances of overlooking such a vital matter as the identity and fitness for purpose of your Trustees is kept to a minimum. Call Robin Jackson or Matt Boardman if you would like to know more.