Trustee's Responsibilities Under Scrutiny

By Author: Steven Tomey
Total Articles: 8
Comment this article

As Will Writer in London we are conscious of Testator's historical slant towards selecting Trustees for their Estate based on ‘likeability' without enough thought as to whether they are suitable to make sound investment decisions.

The role of a Trustee is much more exacting than most Testators imagine and requires a ‘Duty of Care' and willingness to make the money left by the Estate work until it is passed to the beneficiary.

As our Society becomes more akin to operating in a environment of a ‘suing culture' a stark warning needs to be given to everyone making a Will to choose their Trustees carefully and perhaps even prime or test them on their obligations and width of their investment remit. If you remain unconvinced that consider alternatives or advise that in the event of your death you do not want them to undertake this responsibility alone and steer them towards the professional services of a Financial Advisor, and fund this out of your directions in the Will.
Statutory duty of care
What is meant by a ‘Duty of Care', well a chain of Victorian case law established the principle ...
... that a Trustee making investment decisions must act as a ‘prudent businessman' would act in the management of his own affairs.
‘As a general rule a trustee sufficiently discharges his duty if he takes in managing trust affairs all those precautions which an ordinary prudent man of business would take in managing similar affairs of his own.' (per Lord Blackburn Speight v Gaunt (1883) LR 9 App Cas 1). The test is an objective one weighed against the standard of an ‘ordinary prudent man of business' where he is making an investment for the benefit of other people for whom he felt morally bound to provide. (Learoyd v Whiteley (1887) 12 AC 727).
Things have moved on

Statutory duty now applies to investment functions carried out after the Act came into force (1 February 2001). The provisions of the Act do more than simply place the ‘prudent businessman' test upon a statutory footing; taken together, sections 3 and 4 of the Act mark a shift away from the ‘prudent businessman' rule (which expected trustees to act cautiously, restricting investments to a range of authorised investments) towards the ‘modern portfolio theory', which states that Trustees should seek to establish a suitable level of risk and diversification across all assets.

The irony

Our London Will Writing Consultants are often asked to put a Trust in place to prevent minors from frivolous spending until the money can be fully appreciated, and it now looks like the excused can turn the excuser if the Trustees do not perform as expected. So think carefully before you bestow the responsibility of a Trustee on someone who is unable to manage either the money wisely or be able to withstand potential scrutiny.
Richard Stokes
Niche Will Writers in London | London Will Writers
Members of The Society of Will Writers
www.nichewills.co.uk

http://www.nichewills.co.uk/