Trustee investments...take advice

The role of trustee is not to be undertaken lightly, especially as trustees are personally liable should a beneficiary claim some form of negligence.

Trusts are often created as a result of an instruction in a will, especially when someone wants to leave a legacy with specific requirements, for example where children and grandchildren receive a significant inheritance at a time when they are not old or wise enough to make appropriate decisions.  Such trusts usually require investment decisions to be made by the trustees until such time as the beneficiaries are legally entitled to the capital.

Because the role of the trustee is so important, and has obligations and liabilities, there is a real need to take professional investment advice when the inheritance is initially received.  It is also important to regularly review the investments held in trust, ensuring that they remain suitable as well as diversified - all of which are stipulations of the Trustee Act 2000.  Trustees who ignore these duties would leave themselves vulnerable.

There may be more than one beneficiary under a trust.  For example, an Interest of Possession Trust allows a life tenant to receive income from the trust investment(s), yet future beneficiaries have an entitlement to the remaining capital.  Therefore consideration must be given to their requirements too.  Whilst there is a variety of options available for trustee investment, one of the initial areas for consideration is the level of risk that a trustee feels is most appropriate.  This is an area where professional guidance is essential.  Being too cautious or placing too much of a trust investment in cash, for example, could appear negligent of the need to diversify.  Moreover, in the current climate of low interest rates, the risk of inflation makes matters worse.

At Birkett Long IFA we work with our legal colleagues to ensure that trustees receive appropriate investment advice, helping them meet their legal obligations as well as supporting them with their administrative duties.

Mike Greely
01206 217324 
[email protected]