When creating a Will, it’s important to consider who will be taking care of your estate upon your death. There are many roles involved in the estate administration process that may include the named Executor(s) and Trustee(s). In this blog, we will explain the role of a Trustee in a Will, how they are appointed, and the difference between Trustees, Executors, and beneficiaries.
What is a Trustee?
A Trustee is an individual who is appointed to take care of certain assets on behalf of those due to inherit. This person is responsible for managing and distributing these assets.
What is a co-Trustee?
In some circumstances, a Testator (the writer of the Will) may choose to appoint more than one Trustee. In this case, they are known as co-Trustees. Usually, all co-Trustees will have the same duties and obligations. Alternatively, a co-Trustee may be appointed temporarily if the main Trustee is unable to act for any reason.
What is the purpose of a Trust?
There are many reasons why someone may set up a Trust; it could be to account for assets including cash, property, land, and personal possessions. When a Trust is specifically set up within a Will (to pass on assets after a death), it is called a Will Trust.
Often, a Trust is set up because one or more of the beneficiaries is a child under the age of 18 and therefore needs financial supervision. However, a Trust could also be set up because an adult beneficiary lacks mental capacity or has other reasons that prevent them from managing the inheritance. It is also common for a Trust to provide income or property to an individual’s second spouse in their lifetime, whilst also ensuring children from the first marriage will benefit after the second spouse’s death.
What does a Trustee do?
The Trustee will manage the money or assets that have been appointed to another individual. The Trustee also decides when and how the inheritance is allocated to the beneficiary.
They must act in the best interests of the beneficiary or beneficiaries, ensuring they also follow the terms as they are laid out in the Will. However, if the Trustee is appointed to a Discretionary Trust, they are entrusted to make decisions about how the money should be spent.
Essentially, the role of a Trustee is to hold the items reserved in the Trust and preserve their value until the time comes to release the inheritance to its beneficiaries. Additionally, they must adhere to the terms of the Trust and ensure that its purpose is fulfilled.
What are the differences between an Executor and Trustee?
The role of a Trustee is not the same as the role of an Executor. The Executor is responsible for managing all aspects of estate administration, from obtaining the Grant of Probate (if applicable) to distributing inheritance to beneficiaries. The Trustee’s role is needed when beneficiaries are being paid from the estate; this is where the Executor role ends.
Can an Executor also be a Trustee?
The Executor(s) of a Will can also be appointed as Trustee(s). However, it is important that the individual(s) taking on these roles understand the distinction between their responsibilities. Furthermore, the individual(s) should realise that they may be dealing with the estate for a long time, as Trustees can still be involved with the inheritance for years after the death. It is always best to speak to the people you are naming in your Will beforehand to ensure they are happy to take on the duties.
Can a Trustee be a beneficiary?
A beneficiary can also be appointed as a Trustee. However, it’s good to ensure that at least one Trustee (if you are appointing multiple) is a non-beneficiary so that not everyone dealing with the inheritance has a financial interest in the Trust. This is especially important for Discretionary Trusts, as there could be conflicts of interest between Trustees and beneficiaries.
In general, it’s best practice to appoint at least two Trustees, regardless of the circumstances.
What is the difference between a beneficiary and a Trustee?
Although a Trustee can benefit from the estate, they should not benefit from the Trust that they are handling unless the Will and Trust agreement explicitly state otherwise. Therefore, the difference between a beneficiary and a Trustee is that the beneficiary is the person receiving the inheritance, whether that is money or any other assets. The Trustee is the person that is managing this inheritance on their behalf.
Who appoints Trustees of a Will?
The Trustees and the terms of agreement are named in the Will. This must be decided and documented by the Testator of the Will – upon creating a Trust, they could also be known as the Settlor of the Trust. As the Will names the Trustees and terms of the Trust, it becomes the Trust document.
When appointing Trustees, you should carefully consider your options. The individual(s) that you appoint should be trustworthy, reliable, and willing to act as Trustee. You can also choose to instruct a professional to act as Trustee, which would guarantee that they are a neutral and able third party. This is similar when choosing your Executor(s) – read our blog on selecting the Executor(s) of your Will.
Do you need a Trustee in a Will?
It is not always necessary to appoint a Trustee when writing your Will. It is essential to choose and name a Trustee if you create a Trust in your lifetime or if the terms of your Will create a Trust. However, it will likely not be needed if your estate is only passing to adult beneficiaries who have full capacity.
Can a Trustee renounce their role?
A Trustee can choose to renounce their role – they could also be incapable at the time they are needed. This is an advantage of appointing multiple Trustees, as if one Trustee is unable to act, the other(s) can step in. If there is only one Trustee appointed and they renounce their role, they are entitled to choose a new Trustee. Alternatively, a third party may step in, such as a Solicitor or professional Trustee.
What happens if a Trustee of a Will dies?
If the Trustee dies before completing their role and other Trustees remain, the surviving individuals can appoint a replacement or choose to continue the role themselves. If there is only one Trustee appointed and they pass away, their Executor(s) or Administrator(s) can appoint a new Trustee on their behalf.
An arrangement that allows a certain portion of your assets to be controlled by a Trustee on the behalf of those who will benefit.
The individual(s) named in the Trust document – they will be responsible for managing the assets on the behalf of the beneficiary under the terms of the Trust.
The individual who placed the assets into a Trust.
Those who are set to benefit from the assets in the Trust or an estate.
The individual that has made the Will.
The person named in the Will who is responsible for administering the estate of the individual who has passed away.
The person who is appointed to administer the estate when the deceased did not leave behind a Will.
The umbrella term for Executor(s) and Administrators(s).
The process of dealing with the deceased’s estate including all assets, debts, taxes, and distributing inheritance.
The process of obtaining a Grant of Probate, which may be required to grant the Personal Representative with the legal right to proceed with estate administration.
Kings Court Trust is available to offer free, impartial, and practical advice on all elements of estate administration – this includes dissecting the Trust with the Trustees and explaining the processes involved in plain English.