When discussing trust planning with clients, much of the focus naturally falls on selecting the right trust and achieving the desired tax outcome. In this article, Tom Archer – tax & trust specialist at Quilter, explores an equally important consideration for the long-term success of a trust, in choosing suitable trustees.
Trustee selection is not simply a matter of appointing someone the client knows and trusts; it is about ensuring the individuals appointed can carry out the responsibilities the role demands. Trusts can last for many years, sometimes generations, and trustees make decisions affecting beneficiaries, assets, administration and legal compliance throughout that time.
Before appointing trustees
Friends and family may agree to act as trustees without fully understanding what the role involves. The key question is whether they can meet the duties that come with the appointment, not just whether they are trusted by the client.
Duties that should shape trustee choice
Trustees need a clear understanding of how the trust works, including the powers, duties and restrictions in the trust deed. Some trusts need closer attention.
For example, trustees of a flexible reversionary trust must understand the settlor’s retained entitlements, when they arise and how they interact with wider trustee powers, including distributions to beneficiaries.
Assessing the needs of beneficiaries
Trustees should be able to assess the beneficiaries’ circumstances, including age, financial position, health, disability and significant life events that may affect future needs.
The trust type shapes how this applies. In an absolute trust, the key question is when fixed beneficiaries should receive assets.
In a discretionary or flexible trust, trustees may also need to decide who benefits, by how much and when. In all cases, investments should be managed to meet the trust’s objectives and beneficiaries’ needs.
Managing administration and reporting
Trustees must keep accurate records, register assets correctly and meet reporting obligations.
Depending on the trust, this may include maintaining Trust Registration Service records, dealing with tax compliance and managing events such as ten-year periodic charge assessments for relevant property trusts.
The legal framework
Trustees do not need to be legal experts, but they do need to understand that their decisions are governed by legal duties. In England and Wales, the Trustee Act 2000 sets much of the framework for how trustees exercise their powers.
Separate legislation applies in Scotland and Northern Ireland, though the broad principles are similar.
For example, if trustees are investing trust assets, they should consider whether the investment approach is suitable for the trust’s purpose and the beneficiaries’ needs.
That means taking appropriate advice where needed, avoiding unnecessary risk and not simply choosing what they personally prefer.
A trustee with professional expertise may be expected to meet a higher standard, but all trustees must act with reasonable care, skill and in the interests of the beneficiaries.
Choosing the right trustees
This is where early conversations can help prevent issues arising in the future.
When discussing appointments with clients, consider whether the proposed trustee has capacity and reliability, sound judgement and impartiality, and a willingness to take advice when needed.
Technical knowledge can help, but reliability, impartiality and sound judgement are usually more important than detailed tax or legal expertise.
Family members are often appointed because they understand the beneficiaries and family circumstances.
This can work well, but complex arrangements or difficult family dynamics may justify appointing a professional trustee, or using a mix of family and professional trustees to balance personal understanding with expertise, continuity and independence.
While many trusts are administered effectively by family members or friends, there will be cases where a professional trustee is worth considering.
This can be particularly relevant where trust arrangements are complex, family dynamics are challenging or long-term continuity is a concern.
Quilter has partnered with ZEDRA to provide access to professional trustee services, giving advisers and clients an additional option when independent expertise and ongoing administration support are required. Further details can be found on Quilter’s professional trustee service page.
Trustee duties are manageable with the right support and advice
The aim is not to make trustees technical experts, but to make sure they understand when advice is needed.
For example, a single premium life assurance policy can simplify administration because no direct tax liability arises on the underlying assets while they remain in the policy.
This is where advisers add value: helping clients match trustee choice, trust structure, investment approach and ongoing support.
Clear technical guidance and practical provider support can help advisers stay current and give trustees confidence in the decisions they need to make.
Main image: trusts, markus-winkler-ZYFjjsmWklg-unsplash
