Trust Management: How To Appoint A Trustee

The management of a trust can be a complicated and demanding process. Trustees must be prepared to carry out their role for years and be diligent enough to run the trust in a way which promotes and protects the interests of its beneficiaries, while adhering to the wishes of the settlor’s original trust agreement.

Who can be a trustee?

Many trust agreements name close friends or family members to the position of trustee. In these cases, the trustee’s relationship to beneficiaries and familiarity with their needs is deemed an advantage towards acting in their best interests. However, this may not always be the case: trustees with a close personal connection to a trust agreement may find themselves forced to make difficult financial decisions in which a conflict of interest is unavoidable. Disputes within families can lead to resentment  and trustees may encounter problems carrying out their duties.

Independent trustees can avoid many of the problems that lay-trustees, such as family members, encounter. Financial organisations offer the services of professional, independent trustees to cater to any kind of agreement – with personnel from a range of backgrounds both financial and legal. Appointing a lawyer, actuary, accountant or any financial services professional as trustee, means having the peace of mind that a trust is being run by someone with specific finance experience. Professional trustees are also independent third-parties and will be able to make decisions about the trust in a completely impartial manner – free of the pressure and influence that often affects lay-trustees.

How do I appoint a trustee?

Plenty of organisations offer services and advice on how to appoint an independent trustee. Settlors should consider, prior to setting up a trust agreement, the qualities and skills their trustees will require. The trustee role carries a wealth of responsibilities, including:

Taxation & administration: It is the trustee’s responsibility to take care of the taxation of the trust and its administrative and legal obligations.

Investment & distributions of assets: trustees should have a full understanding of the trust agreement and the circumstances in which assets are to be released to beneficiaries. They should also be able to take advantage of investment opportunities that offer the chance to enhance their trust’s assets.

Communication & decision making: decisions made regarding the trust require unanimity on the part of trustees. Strong communication skills and an ability to work with a trustee board or other members of the agreement are extremely important.

When selecting a trustee, it’s worth remembering that any failure to carry out those administrative and legal obligations may incur penalty costs. These costs are often incurred by the trustee – another reason to ensure the role is filled by a paid professional with a full understanding of those responsibilities.

A well-run trust, from a small inheritance to a large company pension, benefits from an independent, professional overseer. Finding the right trustee or group of trustees, with the right expertise and experience, is a crucial step towards ensuring the trust moves forward in exactly the way the settlor intended.

Before appointing a trustee, it is important to consider the specific demands the plan will place on the person or people served with overseeing its management.

Citations:

This article about appointing a trustee was written by Hal Wightman, an independent pension professional.

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