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Trustees Duties and Responsibilities

Investment

Trustees duties and responsibilities. Trustees need to ensure that they abide by the rules and regulation from the trustee act 2000

If you are a trustee of a charity or any other form of trust then you will have certain responsibilities to ensure the terms of the trust are adhered to. Your responsibilities can be split into a number of areas. These are:

The Trustee Act 2000

The Trustee Act 2000 also introduced additional requirements on Trustees. The Act requires trustees to abide by a duty of care. The aim was to provide a safeguard against any potential misuse of the trustee’s powers.

The duty of care requires trustees to exercise due care and diligence. Trustees must take into account their experience and knowledge they might have. This means that there is a higher duty of care for professional trustees (for example an accountant, solicitor or investment manager) when carrying out the trustees duties.

Statutory Duty of Care

The Trustee Act 2000 outlines a statutory duty relating to Trustee Investments, unless the trust has outlined specific provisions with the Trust deed. Trustees are required under the Act to ensure that any existing or proposed investment is suitable.

General Powers of Investment

The trustee act 2000 placed additional responsibilities onto trustees to ensure that the trust investments are suitable and are diversified. As a consequence trustees should consider independent financial advice when reviewing the trusts investments.

Dependent on the size of the trust or the trustees experience the trustees might consider it unnecessary or expensive to obtain this expertise.

A new power of General Investment was introduced to help with trustee powers. Unless the trust has specific restrictions stated in the deed (and it was created after 02/08/1961), trustees can make any investment except for land.

Standard Investment Criteria

As a consequence, any existing or proposed investments held in trust should meet the standard investment criteria. Trustees are required under the Trustee Act 2000 to regularly review the suitability of trust-based investments. The trustees can decide the frequency of reviews, but we would recommend that a review is carried out at least annually. For larger trusts the trustees might consider reviewing the trust assets on a more frequent basis.

Within the Trustee Act 1961 certain rules put restrictions on trustees, where the trust itself did not clarify any wide investment powers. The Trustee Act 2000 replaced the rules within the Trustee Act 1961.

Professional Advice

If trustees require professional advice they should ensure that the appointed adviser is appropriately qualified. They should also be regulated by the Financial Services Authority.

Although it is not a requirement the trustees should consider using an Independent Financial Adviser as opposed to a tied adviser such as a bank, building society or direct sales force adviser.

This will ensure any advice given is impartial and independent.

Considerations needs to be given to the trust aims, investment diversification, costs, risk profile of the trust fund in addition to several other aspects. Other considerations would include the investment requirements of the trustees and beneficiaries, whether an ethical or sociably responsible investment strategy should be used, the tax position of the trust and the underlying tax position of the investment held within the trust.

When trustees consider make or reviewing any trust based investments they need to take into account their duty of care in addition to whether the investment is appropriate. If the trustees do not have sufficient knowledge they are expected to appoint an adviser that can provide this service.

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