What Does Being a Trustee Mean?
Perhaps you have been asked to be a trustee or maybe you are considering setting up a trust yourself – in either case, there are a few things you should know before deciding. We have put together a handy guide to cover the basics.
What is a trust?
A trust is set up in order to manage money or other various assets on behalf of someone else. There are always at least three people in any trust; the settlor who puts in the money or assets, the beneficiary who benefits from it and the trustee who manages the trust. There can be more than one settlor, beneficiary or trustee involved in a trust. So, why would you set one up? Well, there are a few common reasons:
- If the beneficiary is too young to manage their own affairs, typically under 18.
- If the beneficiary is an older person who needs to pay for long-term care.
- If the beneficiary has a permanent disability which means they can’t manage their own affairs.
You can find out about other types of trusts here.
What are a trustee’s responsibilities?
A trustee takes responsibility for managing money or assets that have been set aside in a trust for the benefit of someone else. This means that the money or assets can only be used to the beneficiary’s benefit and all actions a trustee takes should be in their best interest.
Trusts vary depending on circumstances, some are very specific and detailed and others, known as discretionary trusts, allow the trustee to exercise more personal judgement in their decisions. Being a trustee of a charity varies again and involves additional duties, such as producing a governing document.
What about tax?
Trustees usually have to take care of paying taxes on behalf of the trust and, depending on the type, might have to pay:
- Income Tax
- Inheritance Tax
- Capital Gains Tax
Trustees have to report details of the trust to HM Revenue & Customs and make sure the tax is paid.
Should you become a trustee?
There is a legal obligation entailed in being a trustee, which is effective that they are bound to act in the beneficiary’s best interests – this is also known as fiduciary duty. The legal penalties for neglecting this duty can be severe and, not only that, but if the trust fails to pay its debts or loses money some other way, you can also be liable.
There is a time commitment, not just a legal commitment – some trusts last for 125 years. You will also be expected to cooperate and make decisions in harmony with the other trustees. However, there are benefits, including the fact that you could really help someone who desperately needs it.
Still not sure? The best thing you can do is consult a Financial Adviser. They can give potential trustees a better idea of how much work it will take, and whether it’s really important that they are the one to do it.
If you want advice on becoming a trustee, get in touch with us today at firstname.lastname@example.org or call 01992 500 261 now and see how we can help address your financial future.
This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions. Investments can go down as well as up and you may get back less than you invested.
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