Last Will and Testament - what are trustees?
Janet Cribb
The Executors job is solely administrative; that of the Trustee can be on-going and subject to a different set of rules. These are usually set out in an act of parliament called ‘the Trustees Act, or similar. The Trustees job in a nutshell is to look after property that will one day belong to somebody else. This is a huge responsibility and the Trustees powers are set down in a Will (the ‘Legal Jargon’ usually called the Trustees Powers) but are also governed by statute.
When someone dies and the Will is approved for administration (ie the grant of Probate is forthcoming) the first thing that happens is that the estate is put on hold whilst the executor sorts out what needs to be done (see: Last Will and Testament - What Are Executors?). This effectively sets up a trust with its own bank account which enables the executor and trustee to call in money owing and pay bills. (You can see now why the roles are usually given to one person) It is called the Administrative Trust. Once the administration of the estate is finished and the accounts have been signed off by the Probate office the administrative Trust has no further function to perform. If there are no children involved and no elderly parents, then the bank account is used to pay the final distribution of the estate assets and closed. However, if there are children under the chosen vesting age, or maybe elderly parents who need financial support according to the Will, then the assets of the estate are transferred to a Trust account and the Trustees will be signatories and managers of the money until the children reach the right age. The children will then inherit absolutely their share of the estate, or, if they too die before the vesting age, the assets will be distributed according to the instructions in the Will. This second trust is known as a Will Trust.
To put it in perspective, the first job of a Trustee should be to change the locks on the doors on the deceased’s home. I have lost count of the number of people who have told me about family members, cleaning ladies or even neighbours, who have entered a home following the death of an older person and helped themselves. If the locks had been changed then nobody could have entered and the chattels would only go to the person in the Will who was entitled to them. Often, incidentally, there is a substantial amount of cash hidden away somewhere, older people sometimes do not trust a bank or simply do not want to risk being stuck without any cash if they are unable to get out of the house.
On a grander scale, the task is exactly the same when applied to the assets of the estate, such as a house or valuables, or money. If there are junior members of the family then the Trustees will have to arrange for the proper management of the financial assets and real estate until they each reach a certain age, usually stated in the Will, and known as the ‘vesting age’. The default age is 18, but most people choose 25 or 21. The children and their guardians will receive money for their daily needs, but the Trustees may also pay bills on behalf of the beneficiaries.
The Trustees role really is of protection and provision. Sometimes people are shocked by the breadth of the Trustees Powers in a Will, but what has to be remembered is that the Trustees must always act in the best interests of the beneficiaries. The Americans and New Zealanders have a lovely phrase which just about sums it up, that the Trustees must act ‘as a man of prudence and intelligence would act in the management of his own affairs’. No outrageous risk-taking, sensible responses to requests from the beneficiaries for money (no you can’t have a Porsche, how about a nice ford Fiesta?) and diligent management of the estate. Mismanagement of Trust property may give rise to legal proceedings, and there have been spectacularly public criminal cases where Trust money has been taken by individuals, usually pension funds which are held in trust and subject to the Trustees rules and statutory restrictions. The same set of rules apply to Trustees of anything, including estates under probate.
It may be that a Trust company is appointed. Many of the restrictions imposed on Trustees in their activities are to prevent insider dealing or taking advantage of a privileged position, particularly regarding property for sale. The various Trustees acts make it an offence to break the rules and are in place to protect the beneficiaries from unscrupulous individuals who may not have their best interests at heart.
We have listed a few here, but wherever you are from you can find the relevant acts on the government websites.
Trustees may ‘appropriate’ items, which mean giving a beneficiary something (for example a car, or shares) instead of cash and taking away the value of it from that beneficiary’s entitlement. This is something that should be stated in the Will.
The regulatory body is the Society of Trust and Estate Practitioners (STEP) and they have a separate set of powers which may be applied to your estate simply by reference in the Will. You may read all about STEP and/or find your local office through their web-site http://www.step.org/. STEP is highly respected world-wide and can provide information that applies to you wherever you are, including a series of very useful leaflets on Wills and Probate matters.
Click here for the Trustees Act applicable to Land and assets in the UK
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Janet Cribb
Channel: Wills & Living Trusts |
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