How can family trusts help to protect assets? (Part 2)
The subject of family trusts can be complicated at the best of times. To learn more about the role they can play in future-proofing your parent’s assets take a look at part one of our two-part series to find out what trusts are, how they’re used and how to manage them.
In this article we look at the role a trustee plays in administering a trust, what an executor of a will should do following the death of its author and the type of legal responsibilities that both these appointments share.
When my parent sets up a trust is there anything I need to know or do?
Flexibility, communication and regular contact are key but ensure you are aware that your parents always have, and must have, the final say and sign off on any financial decisions. If you’re helping them to set up the trust use the initial interview and conversation with their solicitor or financial professional to see what they can provide as a service. They are there to help and there are lots of ways to make the issue of finance and trusts much less complicated.
As trustee of a trust, what do I need to know or do?
Being a trustee brings with it a legal responsibility. You are responsible for the money or assets placed within the trust to benefit someone else. You have what is known as a ‘fiduciary duty’ to act in the best interests of the person that the trust is for.
You can however be liable as a trustee if you are deemed not to have made the correct decisions and have lost the trust money. However as long as you have legally done everything correctly and to the best of your ability you should not be liable personally. If you are unsure of your obligations it is essential that you get advice.
As an executor of the will, what will I need to know/do about the trust?
If you are the executor of someone’s will, you are legally responsible for distributing the estate according to the instructions provided. Often, it’s a one-time event and assets are distributed immediately, but as an executor of a trust you will also have to comply with the terms of trust, which may well mean releasing funds and assets over a period of time or when a beneficiary reaches a particular age. In the meanwhile the assets must be protected and the provisions of the Trustee Act 2000 complied with, for example, in how the assets are invested and the advice you must take.
As the holder of Power of Attorney, what do I need to know/do about the trust?
If you hold a Power of Attorney, you will know that it is a legal document that gives one person the right to act on behalf of another. In the cases of a trust, a third party can be given the ability to act on behalf of the principal in certain situations although this is a difficult area and you should seek advice.
If the person in question with a trust is incapacitated, on a life support machine or otherwise close to death, a lasting power of attorney for health and welfare will allow you to make important decisions regarding medical procedures but a lasting power of attorney cannot be used to exercise trustee functions, save in some circumstances to appoint a new trustee in place of the person who is incapacitated.
This article was created with expert help from Burt Brill & Carden Solicitors. Find out more at www.bbc-law.co.uk.
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