Key Trustee Responsibilities
Fulfilling regulatory obligations - Trust Registration
Trustees are responsible for ensuring a registerable trust is registered on the HMRC’s online Trust Register, unless the trust falls within the list of the few trusts that are excluded from registration.
Examples of trusts that do require registration include:
A trust holding a life insurance policy(ies), that has a surrender value and that is largely held for investment reasons and that can be accessed during the policy’s lifetime. This will include trusts holding investment bonds or capital redemption policies. The typical investment of inheritance tax planning product provider trusts such as gift trusts, loan trusts, discounted gift trusts and retained interest trusts. These all require registration, whether the trust is a flexible power of appointment trust, bare trust or a discretionary trust.
Designated accounts, where the donor’s intention at outset was to create a trust for a named beneficiary, creating a bare trust, even if not constituted with a trust deed, require registration. The registration is confirmation that a trust was created at outset.
Will trusts that remain in existence for more than two years after the date of death.
Trustees need to update the Trust Register with any changes to the details recorded on the TRS within 90 days. Such changes would include a change to the trustees or their details, change to beneficiary details, a non-taxable trust becoming taxable. If the trust is a taxable trust the trustees will need to make an annual declaration as part of the tax return process.
Trustees of trusts that are required to register but who have not registered the trust within its applicable deadline or maintained the trust record may become liable to fines and penalties.
Fulfilling tax obligations
Trustees are legally responsible for reporting and paying tax on behalf of the trust.
Income tax and capital gains tax
Declaring and paying income tax on any taxable trust income received and declaring and paying capital gains tax on any taxable gains made when selling or gifting trust assets.
Trustees need to submit a Self-Assessment tax return, to report the taxable income and gains and the tax due, by the tax return filing deadline and make payment of the tax by the due dates.
Inheritance Tax
Trustees should be aware of the current inheritance tax rules that apply to trusts and the thresholds and exemptions, as well as any reliefs or allowances that may apply to the trust. Almost all Discretionary trusts, and those and Interest in Possession trusts created on or after 22nd March 2006 will need to consider inheritance tax on each 10th anniversary of the trust and when capital exits the trust. If necessary, trustees will need to file IHT100 forms to declare the inheritance tax due and to
make payment of the tax.
Fulfilling the general duties of trustees
To observe the terms of the trust - Trustees must hold the trust deed and read and understand the terms of the trust and comply strictly with the duties and directions set out in the trust deed. If trustees act outside the powers of the trust terms, the trustees are acting in breach of the trust. A breach of trust will cause some detriment to the beneficiaries and provide the beneficiaries with a cause of action against the trustees.
To act impartially between beneficiaries – Trustees have a general duty of care to act in the best interests of all the beneficiaries. Trustees must act impartially between the beneficiaries and ensure that one beneficiary is not unreasonably favoured at the expense of another. Trustees may need to balance competing interests. This duty can impact the investment decisions of the trustees.
To meet and keep accurate records and provide information - Trustees will need to meet to fulfil their role and must keep accurate records of the meetings. Accounts information to record the trust transactions will also need to be kept. Keeping accurate records will help with meeting tax and regulatory responsibilities. Beneficiaries can request information from the trustees. However, trustees may wish to seek advice in this regard as there's no obligation to share all information and documents with the beneficiaries.
To act unanimously - Trustees must act unanimously unless the trust deed says otherwise.
To act solely in the interest of the beneficiaries - The beneficiaries have a right to have the trust administered, the trust fund invested and income distributed in accordance with the terms of the trust. A trustee must not place themselves in a position in which their duties as a trustee conflicts with their personal interests.
To take control of the trust assets – The trustees need to ensure the trust assets are held in their names to enable them to manage and take care of the assets.
To act personally – The role of trustee is a personal one and should not normally be delegated. This typically prevents the Power of Attorney of a trustee with diminished capacity from stepping into the role and being part of the decision making of the trustees. The power of trustees to make appointments of trust funds to trust beneficiaries is not a duty that can be delegated. There are limited statutory provisions that can permit delegation in restricted circumstances. These statutory powers do permit the trustees to delegate investment decisions, but within limits and the trustees remain ultimately responsible.
To take reasonable care – The duty of care expected from trustees depends on whether the trustee is a paid professional or an unpaid lay trustee. The general duty requires trustees to exercise reasonable skill and care, taking account of their experience and knowledge. A higher duty is imposed on professional trustees. The trust deed may include specific provisions.
Fulfilling the investment duties of trustees
Trustees have wide investment powers through the Trustee Act 2000 (E&W). This means that unless the trust deed restricts the type of investment, they are able to invest in any type of asset.
When choosing appropriate assets to invest in, the trustees must consider the purpose of the trust and the needs of the beneficiaries and apply the standard investment criteria accordingly.
Considering the suitability of the investments and the need for diversification of the trust investments, in so far as this is appropriate to the circumstances of the trust and in meeting the requirements of the trust terms and the beneficiaries of the trust.