By Raj and Fiona Shah of Blue Wealth Capital
Our last article discussed the importance of a comprehensive estate plan. An integral part of estate planning is the appointment of trustees. Depending on the type of trust you are creating, the trustee will be responsible for overseeing your assets and the assets of your loved ones.
Most people choose either a friend or a family member. However, it is possible to appoint a professional trustee such as a lawyer, accountant, trust company, or corporate trustee for this key role.
It’s a question of trust
We find that this mnemonic can help to prompt clients when having this type of discussion:
As the name goes, the trustee should be trustworthy. If you cannot trust the individual to hold £10 for you, you should not name them as trustee.
Most people choose a friend or a family member. Other important considerations here include the age of the trustees – it is perhaps not wise to appoint anyone older than you are and, if the trustees know each other, how well do they get on?
Your sister, for example, does not have to be a financial guru, but she should be smart enough to know that she cannot directly invest the money herself. As trustee, she will hire an investment advisor to invest the trust assets or work with your current investment advisor.
Situated in the UK
Ideally, your trustees should be local or in the UK. However, with modern methods of communication such as Zoom, Skype and Microsoft Teams, it is possible to have real-time meetings with overseas trustees.
This is another obvious one but one that many people fail to consider. They must be able to attend meetings and have enough time to read documents carefully.
Being able to communicate both in written and spoken word is an essential skill for a trustee to have.
If you choose a family member or friend, they should be financially astute and good with money. You want someone who is, at a minimum, familiar with basic concepts of investing, and preferably someone who has assets of their own that they are investing with an investment advisor.
It may seem obvious, but choose someone over 18 and of sound mind.
Suppose the above list is exhausted and the client is unable to find a trusted individual as trustee or the beneficiary is a vulnerable individual. In that case, a professional trustee could be considered. This does come with a significant cost, and professionals should not be used to act as peacemakers or arbitrators.
According to the acting solicitors, fees can range between £260-£390 per hour.
Still can’t decide?
First, consider co-trustees. Why not name your sibling and a professional trust company?
Build flexibility into the plan. Give others, such as your spouse, the ability to remove and replace the trustees. You also may be able to remove and replace the trustee during your lifetime.
Let someone else decide. You can let the beneficiaries choose the trustee on your death in certain circumstances. Or, you can let your lawyer or other advisor choose the trustees down the road.
Please don’t hesitate to contact us if you would like to learn more about how we can help.
Raj Shah is founder of Blue Wealth Capital and has been shortlisted for Financial Planner of the Year and Investment Adviser of the Year. Raj can be reached at:
Fiona Shah is operations director at Blue Wealth Capital. Fiona can be
reached at: email@example.com