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Discretionary Trusts - Trustees Responsibilities

including wills and probate
moorfield
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Discretionary Trusts - Trustees Responsibilities

#280809

Postby moorfield » January 29th, 2020, 10:35 am

Discretionary trusts setup for minors/grandchildren. I have many questions about how these work but this is a salient one. Sorry if it sounds a little woolly, I will try to expand if time permits. Please point me to old threads if I’m repeating them and/or if I’m in the wrong place.

Are trustees accountable to beneficiaries and if so how? eg. Are they obliged to send a regular reports of investments held in trust.

PinkDalek
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Re: Discretionary Trusts - Trustees Responsibilities

#280952

Postby PinkDalek » January 29th, 2020, 6:26 pm

Clearly from what I've written below, IANAL. Might be an idea to look at https://www.step.org/ generally.

The first port of call for Duty of Care etc would be the legislation that applies:

https://www.legislation.gov.uk/ukpga/2000/29/contents

Also are there any particular terms in the Trust Deed?

Are trustees accountable to beneficiaries and if so how? eg. Are they obliged to send a regular reports of investments held in trust.


I don't know the answer to that one, specifically, but we, as Trustees of a Discretionary Trust, have (ir)regular meetings and hope to minute them if anything important is decided.

Annually we write to the beneficiary outlining the payment that has been made in the Tax Year, at the discretion of the Trustees, and supply the Statement of Trust Income (R185 Trust Income). Between us we maintain Trust accounts but these are not shared with the beneficiary.

As to your question, I would be interested in any knowledgeable replies. Here's a random mention of some case law (there may well be more but a deeper search for Henchley v Thompson [2017] EWHC 225 might throw out further information).

https://www.lawskills.co.uk/articles/2017/05/trustees-duty-provide-accounts/

In our case, all professionally set up but, as with most I'd imagine, we were then left to get on with it.

Gan020
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Re: Discretionary Trusts - Trustees Responsibilities

#281165

Postby Gan020 » January 30th, 2020, 2:43 pm

moorfield wrote:Are trustees accountable to beneficiaries and if so how? eg. Are they obliged to send a regular reports of investments held in trust.


This is my understanding. I'm no expert. In short I do not believe the trustees are accountable to the beneficiaries. They are required to act in accordance with the Trust deed. I'm not sure about the second one, but I'm also not sure in what circumstances if the beneficiaries are of a suitable age and show sufficient interest why the Trustees would not be accomodating. Certainly I'm not sure how a Trustee could refuse a reasonable request for information from a likely beneficiary but my instinct is it doesn't have to be legally provided every year.


My more detailed view follows:

The trustees should manage the Trust as set out in the Trust deed. This will set out the beneficiaries which in the case of the discretionary trust I think are you probably thinking about would be the offspring of the settlor and the further offspring of the offspring and so on. Further, it's usual that the powers of the Trust can be so wide that if the Trustees agree almost anyone except the settlor and the wife of the settlor but not his widow can be a beneficiary.

Next there may or may not be an expression of wishes made by the settlor giving some guidance from the settlor as to his wishes for the Trust. This is only an expression of wishes though, has no meaning in law and the Trustees do not have to follow it, although of course largely they would. I would recommend an expression of wishes. The discretionary trust I am a trustee of does not have one that I am aware of, which did not matter so much when the settlor (my father) was one of the Trustees, the issue being of course that discrtionary trusts can run for 80 or 125 years and things change.

We hold an AGM, at which a written report is prepared showing the investments, the performance of the Trust and also any legal or tax matters that have been dealt with, in progress or that may require planning. In practical terms there are 4 likely beneficiaries at present of which 2 are trustees. Because the Trustees are also beneficiaries, great care is taken in the AGM report to ensure there is no conflict of interest. The AGM report is not shared with the 2 beneficiaries who are not trustees (my children). They do of course know about the Trust and are very grateful for the cheques they receive from the Trust which pays University and School fees.

If in due course if my children requested some money from the Trust for say deposit towards a mortgage I'm sure the Trustees would be supportive. If they requested funds to go on holiday this would not fit with my perception of what should have been written in the expression of interests. We might have to have a debate about that if it ever occured...

At some future point, probably around the time that my children have children, I will recommend that my children become Trustees.

Parky
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Re: Discretionary Trusts - Trustees Responsibilities

#281203

Postby Parky » January 30th, 2020, 5:14 pm

moorfield wrote:Discretionary trusts setup for minors/grandchildren. I have many questions about how these work but this is a salient one. Sorry if it sounds a little woolly, I will try to expand if time permits. Please point me to old threads if I’m repeating them and/or if I’m in the wrong place.

Are trustees accountable to beneficiaries and if so how? eg. Are they obliged to send a regular reports of investments held in trust.


A couple of articles on the subject:-
https://www.michelmores.com/news-views/ ... eficiaries
https://www.kww.co.uk/2019/06/07/truste ... ficiaries/

scrumpyjack
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Re: Discretionary Trusts - Trustees Responsibilities

#281212

Postby scrumpyjack » January 30th, 2020, 5:44 pm

Those articles seem mainly to have in mind trusts with specific beneficiaries who have an entitlement under the trust. Often a discretionary trust will have a limited class of beneficiaries (eg my children and their children, my siblings, and any worthy cause in the locality). No one in those classes has any entitlement under the trust until the trustees exercise their discretion and, no one is entitled to know on what basis the trustees exercised that discretion.

I was a trustee of a discretionary trust from 1973 until a few years ago, fortunately without any problems from potential beneficiaries.

Charlottesquare
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Re: Discretionary Trusts - Trustees Responsibilities

#303262

Postby Charlottesquare » April 25th, 2020, 8:03 pm

Given discretionary trusts I cannot see how any individual has a right to accounts etc, however the trustees do of course owe a general duty of care.

This may not help, as in an old book on Trust Accountancy (Scott) and is re Scots Law, but it cites Ross v Ross (1896,23 R (H.L) 67) establishing that "proper accounts must be kept and exhibited to the beneficiaries", but if no specific beneficiaries but merely a class it may not be on point.

As a general point, preparing accounts each year (even if not charge/discharge but mere cash account) is probably good practice, they are then on file if a later challenge re administration subsequently arises. I used to be second trustee for eight trusts but my father's former junior partner, a solicitor, ran them all, I just replaced my father as a trustee when he got a bit old in case his former partner, now a sole practitioner, went under a bus.

Methinks you need a solicitor re this one.


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