If there is a life tenant (a beneficiary entitled to stay at the property), are they upholding any duties imposed under the trust, such as meeting the costs of repair and insurance?
Find out the tax treatment of the trust
Different trusts have different tax reporting obligations and are subject to different tax rates, depending on the wording of the settlement and the underlying beneficial interests.
It is worth trustees obtaining advice about this, as it is their duty to deal with the tax compliance issues, or pay the financial penalties for failing to do so.
If the trustees are unable to complete trust tax returns or keep up with the ongoing changes to tax regulations, they can delegate this function to a suitable professional, who can charge their services directly to the trust.
Investment duties
Trustees have wide investment powers through the Trustee Act 2000 (England and Wales); Charities and Trustee Investment (Scotland) Act 2005; and Trustee Act (Northern Ireland) 2001. This means that unless the trust deed restricts the type of investment, they can invest in any type of asset.
It is a fundamental duty of trustees to invest the trust fund in the beneficiaries’ interests – whether that is in terms of income or capital appreciation.
The trustees’ duty, in relation to investment, is to use their powers in the best interests of current and future beneficiaries. Trustees should also consider whether they have a duty to sell any part of the trust assets.
When choosing appropriate assets to invest in, the trustees must consider the purpose of the trust and the needs of the beneficiaries. They must then apply the standard investment criteria accordingly.
The criteria are the suitability to the trust of the investments, both in relation to the suitability of the kind of investment and the suitability of the particular investment, and the need for diversification of investments of the trust, in so far as is appropriate to the circumstances of the trust.
A trustee must occasionally review the investments and consider whether investments need to be varied, depending on the standard investment criteria.
Trustees can delegate the management of trust investments to a suitable professional, who can charge for their services directly to the trust. It is prudent to delegate the investment management function to reduce risk and provide diversification where appropriate.
Protecting the interests of beneficiaries
Trustees must act impartially between the beneficiaries and ensure that one beneficiary does not benefit at the expense of another.
Consider for example an interest in possession trust where one beneficiary is entitled to income with others entitled to capital on the death of that person.
