What does an effectively managed Trust look like?
It may surprise you to learn that Trusts started in the 12th Century; an English landowner would go off to fight in the Crusades and sign over his land to a trusted person, placing his trust in them to keep the land and property safe until his return.
A Trustee carries the responsibility of making sure that the Trust is properly managed in line with current laws, regulations and requirements, their main duty being to ensure benefits are kept for the Beneficiaries on the principles laid out in the Trust instrument. Beneficiaries, who do not always understand or appreciate the varied requirements, need to trust that a Trustee is performing this duty well and effectively. However, balancing all these responsibilities can sometimes bring a Trustee into conflict with all the relevant parties associated with the Trust, especially the Beneficiaries.
So, let’s take a deeper look at what a Trustee does.
Simply put, a Trustee manages relationships. They manage the relationship between themselves and the Beneficiaries, between themselves and the assets of the Trust and between the Beneficiaries and the assets. If a Trustee wants to manage the Trust well, they must be aware of the needs of the Beneficiaries and constantly weigh those up against the requirements of the Trust instrument.
Equally, a Trustee must comprehend the full extent of the assets and consider if the current investments will enable them to look after the Beneficiaries as required. There is a strange relationship between the assets and the Beneficiaries; some Beneficiaries feel a greater sense of ownership over the assets than the law provides for, while others feel the assets are there for them to utilise in the same way that they might use a bank account. A perfect balance is where the Beneficiaries feel a sense of security in the assets as something that will provide for them over a period of time.
It is the duty of a Trustee to guide the expectations of the Beneficiaries - the assets are there to provide for the Beneficiaries and a Trustee creates an environment where the Beneficiaries appreciate the extent to which the assets can provide.
But how can Beneficiaries be certain that a Trustee is performing their duty well and effectively? The answer is not complex - you simply consider the type of relationship a Trustee is building with the Beneficiaries, as the expectations of the Beneficiaries are the starting point for evaluating a Trustee’s performance.
A Trustee who engages with the Beneficiaries on a regular basis is a good start, and a Trustee who takes an interest in the current and future welfare of the Beneficiaries is to be recommended. Beneficiaries tend to judge the performance of a Trustee based on the performance of the assets, but it is the relationships that a Trustee has and maintains that is a key indicator of the welfare of the Trust. Encouraging discussions about the needs of the Beneficiaries indicates that a Trustee is taking care to ensure that the requirements of the Trust instrument are being fulfilled.
The state of the relationship between a Trustee and Beneficiaries is not the only indicator that the Trustee is performing well, but it is a very good starting point.
Here are 10 points that could assist in building a healthy relationship between a Trustee and Beneficiaries:
- The Trustee helps to simplify the way the Trust is managed so that the Beneficiaries can understand the structure, intentions and motivation of the Trustee
- The Trustee puts in place measures that reduce the risks
associated with the Trust and its benefits. These measures are based on the unique circumstance of the Beneficiaries
- The Trustee does not incur unnecessary costs and can account for costs incurred
- The Trustee continuously connects with the Beneficiaries, so they feel part of the structure and understand their rightful place
- The Trustee ensures that the affairs of the Trust are well organised and their reports to the Beneficiaries are organised and clear
- The Beneficiaries feel that their risks are well managed by the Trustee, that the Trustee is aware of the risks of the Trust as well as the Beneficiaries and puts in place measures that protects as far as possible
- Being nostalgic about the past does comfort us about where we go in the future, so the Trustee regularly explains the purpose of the Trust, how the Trust has come into being and the intentions of the Settlor
- The Trustee displays genuine interest in the wellbeing of the Beneficiaries; not just about the Trust but about life in general
- The Trustee assures the Beneficiaries regularly that there is hope and that the Trust will be able to provide if the Trust assets are managed properly and effectively
- The Trustee helps the Beneficiaries to feel that they are part of an heirloom that the settlor created for them, that they belong to something that is bigger than themselves
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