Factors to be considered when appointing someone as a Trustee of your Will:
Firstly what is a trustee? – A Trustee is a person(s) who is appointed by a Testator, (the person making a will), who has the responsibility of administering the Testator’s trust, solely in the interest of the trust beneficiaries.
Fiduciary Duty – Each appointed Trustee has a fiduciary duty imposed by law on the trustee meaning that he/she/they have a legal obligation to act in the best interest of another party. He/she/they must avoid conflicts of interest and achieve a high standard of care in the administration of a trust. The trustee has a duty to safeguard the assets which are the subject matter of the trust and to ensure that the property is insured.
Conflict – The Trustee must carefully consider the nature and extent of the trust assets and any potential for conflicts of interest, meaning he/she/they, cannot place their own interest in conflict with the beneficiaries. Trust assets must be held separately from the assets that a trustee holds in his/her/their own capacity.
Caselaw – Wild v Wild, 2013 High Court British Case
Facts – Three trustees were appointed, a wife, a daughter and a son for a Mr. Wild’s estate. Mr. Wild’s wife and daughter brought an application to have his son removed as trustee as he had refused to consent to a distribution to his mother.
Findings – Mr. Justice Arnold ordered that the son be removed as a Trustee as the son had become conflicted by his own concern that should a distribution be made from the trust to his mother, he would receive little or nothing of his parent’s wealth. Costs were awarded against the son and a distribution was made to Mrs. Wild immediately.
Conflict fundamental – Mr. Wild’s son had allowed his personal interests to influence his decisions as a trustee.
Standard of Care – A trustee is imposed with a duty to administer a trust with the skill and care that a reasonably prudent business person would extend to their own affairs and apply any special knowledge he/she/they may have.
Caselaw – Bartlett v. Barclay’s Bank Trust Co Ltd (No.1)(1980)
Facts – Barclays Bank Trust Company was the sole Trustee of a settlement which consisted of a 99.8% shareholding in a private company. The Bank did not actively or regularly seek information on the management of the company and the beneficiaries took action against the bank for breach of trust and loss of funds.
Findings – The Court held in favour of the Beneficiaries as the bank had failed to supervise the business of the company.
Standard of Care Fundamental – The bank was a Trust Company and therefore owed a higher duty of care to the beneficiaries as it was a trust corporation which carried on the specialised business of trust management.
“Absolute discretion” – A term quite commonly used in Trust Deeds
Caselaw – Stacey v. Branch (1995)
Facts – The Beneficiary brought a claim against a trustee alleging breach of trust on the grounds that the trustee had failed to exercise the necessary degree of care in managing the trust property. A house which formed part of the trust had not been rented out by the trustee, thus generating a rental income for the trust, but had instead been occupied by a caretaker.
Findings – As the trust deed conferred a power on the Trustee to deal with the trust “ as he in his absolute discretion shall think fit”, although the use of the terminology “absolute discretion” did not relieve a trustee from his duty to exercise reasonable care and prudence, the Court held that the Trustee’s decision to place the caretaker in occupation of the property was one made bone fide in the exercise of his discretion. The Beneficiary’s claim was dismissed.
Duties of a Trustee:
- To keep proper books of accounts
- To properly distribute the trust property as per the trust instrument
- To maintain equality between different types of beneficiaries
- Not to transfer their duties under the trust to third parties
Factors to be considered when appointing as Trustee:
- Consider the skills and knowledge and experience of the Trustee in advance of appointment
- Consider the time constraints that will be involved in a trustee acting out their duties
- Consider the nature and extents of the trust assets
- Consider any potentials for conflict of interest
- Consider whether a family member, friend or whoever you have in mind, is a suitable person to act as a trustee
- Consider whether it might be more appropriate to appoint a professionally qualified and regulated trustee.
For further information please do not hesitate to contact Valerie Byrne on 01-2960666