duties of a trustee of a discretionary trust

Essentially, the trustee’s duties are limited to deciding whether to exercise discretion, and in doing so, exercising that discretion lawfully and in compliance with … In addition to duties imposed by statute, a trustee will always have fiduciary duties and obligations. Immediate Matters: Make proper funeral and burial arrangements, and pay funeral expenses. a family discretionary trust was established to be the owner of a start up business; a company was nominated as trustee of the trust, with the shares in the company owned by the husband and wife and the husband as the sole director; the wife’s brother was listed as the sole appointor, with the right to remove the trustee in his sole discretion; The duties and responsibilities normally fall into the following categories: Administer the trust according to the terms of the trust document Except when you are the beneficiary of a discretionary trust. The trustee acts as the legal owner of trust assets, and is responsible for handling any of the assets held in trust, tax filings for the trust, and distributing the assets according to the terms of the trust. In general terms, a Trustee has the following duties: To act impartially among beneficiaries. The court will not normally compel the exercise of a power against the trustee's wishes but it will compel performance of such powers attached to a trust as are of the nature of a trust or obligation, as stated in McPhail v Doulton: This usually means that either: 1. The trust may be optimized by giving the trustee discretion in managing the trust and paying out its benefits. Other duties of a trustee are to pay the trust’s bills, maintain insurance for trust property, develop an investment strategy that balances cash flow with potential for asset growth with minimal or reasonable risk, oversee the investments, maintain detailed records, report promptly to beneficiaries, and make timely distributions to beneficiaries. The duties and powers of trustees have been laid down by the common law as modified by the trust instrument and statute. Trustees will often have additional, or more specific, duties imposed upon them by the operation of legislation or the instrument which established the trust (often called a deed). One of the fundamental duties of a trustee is to manage the grantor's assets responsibly for the beneficiaries. The trust is managed by appointed trustees who decide which people become beneficiaries and when and how they should receive inheritance from the trust. The nature of a trustee 's duty towards a beneficiary is fiduciary. Most trusts provide the trustee with some degree of discretionary authority over the making of distributions of income and/or principal to beneficiaries. The following is a brief overview of a trustee's duties: Fiduciary Responsibility. Trustees owe their duties to the trust beneficiaries and in certain situations can be held accountable for their actions or failures to act. However, a plan can expressly provide that the trustee is subject to the direction of a named fiduciary who is not a trustee. Both roles involve duties that are legally required. In a discretionary trust the trustees will have a power to accumulate income. In... Act Impartially Between Beneficiaries. 5808.14 Judicial standard of review for discretionary trusts. The Job of a Trustee. 14.2 Duties of trustees. A discretionary trust is when money or other assets from your estate are left in trust. That authority carries with it responsibility. A discretionary trust, on the other hand, is a trust that has been set up to benefit one or more beneficiaries, but the trustee is given full discretion as to when, if any, trust principal and/or income, are given to the beneficiaries. For example, a trustee can buy and sell property, invest in certain stocks, and open or close bank accounts. Accumulation is the process whereby, under the terms of a trust, the trustees are authorised or required to accumulate income, thereby converting it into capital. The duties of the trustee of a discretionary trust are quite different from the duties relating to a fixed trust. The Trust's Terms. As a trustee is the legal owner of all assets held in a discretionary trust, its name must appear on all legal documents. Among the most difficult decisions for a Trustee to make involves the discretionary distribution of income (or principal) to a beneficiary under a trust. Understanding the trust deed: the trustee must ensure that they have a thorough knowledge and understanding of the trust deed 2. A discretionary trustee may be an employee of the company, but, more than likely, this role is outsourced to a third party. They are also required to consider every beneficiary equally and impartially. The trustee’s fiduciary duties include a duty of loyalty, a duty of prudence, and subsidiary duties. Where a particular power does not exist and the trustee acts on the erroneous belief that it does, he may be in breach of trust. Retain competent certified public accountant and obtain legal advice. The trustee of a trust (either an individual or corporate trustee) owes Common Law duties to the trust. These duties include: 1. In a discretionary trust, the trustee has flexibility on how to distribute income and capital to beneficiaries, which must be documented and governed by terms of the trust deed. Not to permit the discretion of the trustee to be restricted by a third party or … However, a trustee must record and notify the beneficiaries of every management action taken. The duty of prudence requires that the trustee is held to an objective standard of care in … The trustees must do this according to the trust document, but also while taking account of the letter of wishes. However, if the estate holder should become infirm or die unexpectedly, it is essential to have an estate plan set up in advance. of the trust. I consider that the duties of trustees under a discretionary trust are more stringent than those of trustees under a power of appointment (see, for example, In re Baden (No. Discretionary Trusts. Complying with the terms of the trust 3. A lot of estate holders elect to act as their own trustee. To invest in a prudent manner. The duty to act impartially between beneficiaries. Seeking advice where necessary 7. This is a perfectly valid option. Duty of fidelity to the trust 5. To act in the best interests of the beneficiaries. people responsible for carrying out your wishes as you have set To account for their actions and keep the beneficiaries updated. This means that a trustee has to act in good faith in the interests of the beneficiaries and not act for any collateral purpose. With a discretionary trust, the trust beneficiaries have no rights to trust funds. Duty to use diligence and prudence 6. The trustees arrange for the trust fund to be paid to the beneficiaries immediately; or, 2. The duties of a trustee are varied and extremely onerous. Effective Date: 01-01-2007; 2008 HB499 09-12-2008 . (G) During the lifetime of the settlor of a revocable trust, whether or not the settlor has capacity to revoke the trust, the trustee's duties under this section are owed exclusively to the settlor. A trustee that has exclusive authority and discretion to manage and control the assets of the plan is a discretionary trustee. The trust may explicitly dictate how to do this, but, most of the time, trustees have fairly broad discretion to manage the assets as they see fit. The responsibilities of a trustee include management of the assets that are identified within a trust. Again, the specific terms of the A trustee has a fiduciary duty to act in the best interests of both current and future beneficiaries of the trust and can be held personally liable for any breach of that duty. A trustee of a discretionary trust must not choose themselves as a beneficiary or grant themselves any benefit for a personal reason to gain profit. If prior year income tax returns were not completed, file (or arranged to have filed) income tax returns for year of death and for all prior years which are due but were not filed at the date of death. LAWS11010 Property Law 1 The Duties and Powers of Trustees 1 The trustee is under an enforceable duty to manage the trust property Per Lord Hardwicke LC in This is an issue when you have successive trust interests, like a life tenant and... Not to Fetter Discretion. The trustees arrange for the trust fund to be invested, … There is no free lunch in life. A mandatory trust is inflexible; the trustee cannot respond to future events that may minimize taxes, increase the total payments to the beneficiaries, or protect the beneficiary's interest from creditors. This is a key difference between a discretionary trustee and a directed … The usual reason for giving a trustee such discretion is to provide flexibility in meeting the needs of the beneficiaries that might not have been anticipated by the grantor of the trust. Discretionary trusts. 89 | Duties of Trustees Duties of Trustees. Who is the decision maker? Summary of Trustee’s Duties – Page 1 ... determining the general and specific powers and duties of a Trustee under a particular trust agreement. Trustees of a trust generally possess wide discretionary powers and authority. The primary responsibility of a trustee is administering the trust according to its stipulations. To not make a personal gain. The duties include the duty to act impartially and gratuitously when exercising the discretionary power of the trustee. Depending on the trust deed, trustees can decide: Preserving and protecting trust property 4. Read the trust itself carefully, both now and when any questions arise. 0330 606 9591 For initial advice about making a will or to get a fixed cost quote call our will writers. This is a directed trustee. 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