In 2001 the Trustee Act 2000 came into force for trusts established under English Law. Trustees have a legal requirement to understand and take into account this legislation.
The act requires and imposes a Duty of Care on the trustees to legally ensure the trust arrangement is operated in a suitable way. It is especially important for trustees to ensure that the duties imposed upon them by law or the terms of the trust deed are carried out.
Failure to effectively administer the trust could create a breach of trust. If a breach of trust occurs the beneficiaries could opt to take legal advice against the trusteeship and seek financial compensation.
Typical breaches of Trust include:
- Poor administration of the trust that results in financial loss to the trust and beneficiaries.
- Unequal treatment of different classes of beneficiaries.
- Making unsuitable investment decisions that could be challenged by the beneficiaries.
Responsibility of trustees
Trustee’s responsibilities fall into a number of categories:
1.Duty of Care. Trustees are required to act in the best interests of the beneficiaries and the trust arrangement.
2.Standard Investment Criteria. This places a responsibility on the trustees to ensure that the assets held within the trust are invested in a suitable and appropriate manner.
3.Delegation of duties. This power allows trustees to delegate certain tasks in relation to trusts. It does not absolve the trustees for their responsibilities, but might help with the operation of the trust.
Specific Trustees Duties
Under the Trustee Act 2000 the trustees have specific duties that they should ensure are carried out. These include:
- Keeping records, Accounts and completing any required tax returns
- Acting impartially and treating the beneficiaries fairly
- Investing the assets of the trust in a prudent manner
- Distributing the trust assets when required
- Abiding by the terms of the trust
- Paying tax on time
- Ensuring assets within the trust are held in the name of the trust
The act replaced existing powers set out under the Trustee investment Act 1961 with a wider general power of investment. For trusts that do not have wide powers of investment the Trustee Act 2000 provided wider powers.
There are a number of exceptions from the Trustee Act 2000. These exceptions include trusts that are set up under Occupational Pension legislation, Authorised Unit Trusts and some trusts set up under the Charities Act 1993.
The requirements placed on trustees can be onerous and time consuming. We can help guide you through the complexities of the trustee act and help you comply with your trustee responsibilities.