Things to Remember When You’re a New Trustee

As a trustee, you’re responsible for the maintenance of the trust. When you’re a new trustee, the amount of responsibility can overwhelm you. It is essential to learn to manage your trusteeship duties to execute the responsibilities of a trustee accordingly. Some things that you need to keep in mind when it comes to doing your trusteeship role well are 

Understand the Trust Deed

A trust deed is not just useful because it outlines your responsibilities. It is also helpful because it mentions how you should execute the trust. The trust deed is the governing document that outlines everything that a trust has. This is useful for 

• Understanding what the benefactors want from the trust
• The purpose for which the trust is created
• The duration of the trust
• The details of the beneficiaries
• The events that would qualify the trust
• The circumstances upon which the beneficiary would be eligible to receive the trust assets
• The events which would disqualify the beneficiaries from receiving the trust assets
• The time duration for which the trust has been instituted
• The qualifications of the trustees required
• The value of the assets that the trust is required to maintain at all times
• The responsibilities and authorities that the trust board has
• The rights and duties of the trustees

The list mentioned above is not the clauses in the trust deed but the details that the trust would identify. They form the basis for the duties of the trustees. There could be other details as well, but most trusts include this as part of their deed.

Taxation Rules

As a trustee, you need to understand the tax implications of the trust. Each trust has some eligibility factors and benefits that would allow it to claim some amount as a rebate from the total taxable amount that the trust should pay to the authorities. As a trustee, you should understand what the taxation rules for your trust are and what role you play. You are liable for the revenue that a trust makes, and as such, must be aware of the compliance. The taxation rules mandate that certain aspects of compliance must be met, and that should be done within a time frame. If you don’t understand the time frame or are ignorant about it, you could suffer penalties and fines. That would be detrimental to your role as a trustee. So the first step you need to do is to study the taxation rules that apply to you

Investments

Every trust has some assets under it. When an asset is lying idle, with inflation, it loses value. That means the asset at the end of the trust will be worth much less than the value of the asset at the beginning of the trust date. Each trust mandates the risk appetite and how to maintain it. The trusteeship board could decide on hiring a dedicated manager who takes care of the investments, or the trustees could do it themselves. Either way, the agreements that form part of the trusteeship when managing the trust are essential for the sake of the assets under the trust itself. 

As a trustee, it is your responsibility to understand the services of a dedicated investment manager or a trustee who’s purporting to manage the funds are. This is an integral part of the responsibilities of a trustee. Since these agreements deal with financial aspects and decide the monetary fate of the trust assets, due diligence must be done. The trustees are accountable for the performance of the trust assets. In case of any lapses, the trustees could face ramifications as outlined in the trust. 

Also Read: Benefits of Debenture Trustee Agreement

Expenses of Trust

Every trust incurs some expenditure for the maintenance of the assets under it. Most trust deeds put a cap on the expenses or outline what expenses should the trustees incur. Either way, as a trustee, you need to account for the expenses that the entire trusteeship is spending for the maintenance. In most cases, there will be a designated finance manager or accountant who keeps tabs on the expenses. Even if there isn’t one, you should consider the trust deed to understand what expenses are permitted.

Breaching these expenses or incurring them without any noticeable return on them could disqualify the trustee or impose a penalty. So, you are expected to keep a tab on the expenditure. Most trust deeds set up a base budget for the expenses a trustee would incur. This budget could be increased based on the inflation each year or the nature of expenses that could arise each year. Some times, these revisions to the budget would be determined by the benefactor and trustees mutually agreeing. If the benefactor is deceased, then it’s up to the trustees to determine the budget. In most cases, the trust deed outlines specific rules to govern what amount of money is given out as expenditure. 

Maintain Accounts and Insurance

You should keep accounts to record the split of assets and pay the correct entitlements from the right source. For instance, some beneficiaries are only entitled to the income of a trust, which would mean that they would receive the dividends and interest generated on stocks and shares but would not have any entitlement to the stocks and shares themselves, nor the sale proceeds of these. Preparing accounts can reduce the possibility of disgruntled beneficiaries later down the line.

Where there is a property, you will need to ensure that it is insured and that the insurers are noting the trustees’ interests. Arrange for periodic visits to ensure that the property is maintained and not becoming neglected or dilapidated. If there is a life tenant (a beneficiary entitled to stay at the property), see that they uphold any duties imposed under the trust, such as meeting the costs of repair and insurance.

Conclusion

Drafting trust deeds can become a tiresome process. If you’re unsure of your ability to draft legally enforceable agreements, get our agreement templates.