When should a trustee press pause?

Date 28/05/2024
5 minutes to read
Fiona Noon

As a trustee, you have a fiduciary duty to act in the best interests of the trust and its beneficiaries. This means that you need to make informed and impartial decisions that are consistent with the trust’s objectives and the legal and regulatory framework. However, there may be times when you encounter complex or uncertain situations that require you to pause and reflect before making a decision, or even postpone it until you have more information or clarity. In this article, Fiona Noon discusses some of the reasons why pressing pause can be beneficial for trustees and their trusts, and offers practical tips on how to do so effectively. 

Some of the scenarios where pressing pause can be helpful are: 

  • Reviewing the trust deed: Before making any decision, you should always check the trust deed to ensure that you have the necessary power and authority to do so, and that you are complying with any terms and conditions. For example, if you are considering making an investment, you should verify that the trust deed allows you to invest in that asset class, and that you are following the investment policy and strategy. Similarly, if you are considering making a distribution, you should confirm that the person requesting it is a beneficiary, and that you are respecting the rights and interests of other beneficiaries, including minors and unborns 

  • Facing a conflict of interest: As a trustee, you should not be influenced by your personal preferences or relationships, or by the demands or expectations of any particular beneficiary. You should always act fairly and impartially towards all beneficiaries, and balance their needs and interests. For example, if you are faced with a conflict of interest, such as a beneficiary who is also a trustee or a co-trustee who is also a beneficiary, you should disclose it and consider whether you need to excuse yourself from the decision making process. Alternatively, you may seek independent advice or guidance from a professional trustee or a lawyer 

  • Needing to seek professional advice: Trustees cannot be expected to be experts in all matters related to the trust, and may need to seek professional advice from qualified experts before making certain decisions. For example, if you are considering investing in a new or unfamiliar asset class, such as cryptocurrencies or art, you may want to consult an investment advisor who can help you assess the risks and returns of such investments, and advise you on how to diversify your portfolio. Likewise, if you are considering making a distribution to a beneficiary who lives in a different jurisdiction, you may want to seek tax advice from an accountant who can help you understand the tax implications of such a distribution for both the trust and the beneficiary 

  • Regularly reviewing tax advice: Tax laws and regulations can change frequently and affect the trust and its beneficiaries in various ways. Therefore, it is important for trustees to review their tax advice regularly and ensure that it is up to date and accurate. For example, if there are changes in the tax rates or rules in the jurisdictions where the trust or its beneficiaries are located, you may need to update your tax advice and adjust your decisions accordingly. Similarly, if there are changes in the circumstances or preferences of the beneficiaries, such as their residency status or income level, you may need to update your tax advice and consider whether they need additional support or guidance 

  • Challenging and pushing back requests: Trustees have a responsibility to protect the trust assets and ensure that they are used for the benefit of the beneficiaries in accordance with the trust deed. Therefore, trustees should not hesitate to challenge or push back requests that are unreasonable, inappropriate, or contrary to the trust’s objectives. For example, if a beneficiary requests a large or frequent distribution that would deplete the trust fund or jeopardise its sustainability, you should question the rationale and purpose of such a request, and explain why it may not be in the best interests of the trust or other beneficiaries. Alternatively, you may suggest alternative solutions or options that would meet the beneficiary’s needs without compromising the trust’s integrity or viability 

  • Making a blessing application: Sometimes, trustees may face momentous decisions that have significant consequences for the trust and its beneficiaries, such as selling a major asset, changing the trust structure, or terminating the trust. In such cases, trustees may want to seek confirmation or approval from the court before making such decisions. This is known as making a blessing application, which is a procedure where trustees ask the court to review their decision and bless it if they find it reasonable and prudent. By doing so, trustees can protect themselves from future claims or challenges from beneficiaries or third parties who may disagree with their decision 

Pressing pause can be a valuable strategy for trustees who want to make sound and sensible decisions that serve the best interests of their trusts and beneficiaries. By pausing and reflecting before making a decision, trustees can ensure that they have all the relevant information and facts at hand, that they have considered all the possible options and outcomes, that they have sought professional advice when needed, that they have acted impartially and fairly towards all beneficiaries, and that they have followed the trust deed and the law. By doing so, trustees can enhance their decision making process and improve their trust management. 

With a proven track record and a strong global presence, our experienced team is well-equipped to meet your trust needs with integrity and expertise. If you or your clients have any questions on the topics covered above, please contact Fiona Noon.  

This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. This article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained within this article without obtaining specific professional advice. Please contact Equiom Group to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees, and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it. 
For information on the regulatory status of our companies, please visit www.equiomgroup.com/regulatory 
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