Trustee Investment from STEP Qualified Independent Financial Advisers
Since the implementation of the Trustee Act 2000, trustees have a statutory duty of care in the administration of the trust fund. This duty applies to both lay and professional trustees, although the standard expected is higher for professional trustees.
The statutory duty applies to trustee investments. When setting up a trust, or reviewing the investments, you must consider the suitability of the investments to the trust's objectives and to the requirements of the beneficiaries. You have a duty to invest the trust fund so as to provide income for beneficiaries and to protect the value of the capital. In doing so, you must consider the suitability of the type of investment for the type of trust, bearing in mind the ages of the beneficiaries and you must consider whether or not the particular investment chosen is the most suitable of its type. You should also diversify the investments in order to reduce risk, insofar as this is appropriate, given the circumstances of the trust. You must also review the investments from time to time and you must seek advice on investments when setting up the trust or on review, unless the trust is very small. We can advise on suitable investments.
Life Interest Trust
In a Life Interest Trust (also known as an 'income in possession' trust) it is important to strike a balance between the needs of the 'life tenant' (who is entitled to any income as it arises and will therefore prefer to have trust assets invested in high-interest producing investments) and the needs of the 'remainderman' (who is entitled to the assets after the death of the life tenant and is therefore concerned with preserving and increasing the value of the assets).
Tax position of beneficiaries
It is also vital to consider the tax position of beneficiaries, as this can influence the choice of investment. The trustees' and beneficiaries' attitudes to investment risk also needs to be considered. They may also have strong feelings about where the trust fund is invested and may want it to be invested in a socially responsible manner.
Why consult an Independent Financial Adviser and not a stockbroker?
Trustees entrust the investment of the assets to stockbrokers and this may not be suitable for smaller trusts. Stockbrokers often adopt a 'one size fits all' approach without taking into account the circumstances of individual beneficiaries. For example, they may invest in a portfolio of individual shares - an approach that may be far too risky for a smaller trust. Furthermore, stockbrokers' charges for discretionary management can be high.
Isis Financial Planners has two advisers, Maggie Fleming and Louis Letourneau, who are not only very experienced Independent Financial Advisers, but who are also fully qualified members of STEP - the Society of Trust and Estate Practitioners. This makes them,in the words of STEP, some of "... the most experienced and senior practitioners in the field of trusts and estates."
Louis and Maggie can advise on collective investments, such as unit trusts, where the risk is spread across a wide range of companies. Investment bonds can also be suitable investments for trusts, as they have tax advantages and can include investment in cash, gilts, index-linked bonds, corporate bonds and commercial property as well as stocks and shares.
We believe in an asset allocation approach to investment, which spreads investment risk by investing across various asset classes. The mix of asset classes and funds will depend on the risk profiles and personal circumstances of the beneficiaries. The choice of investment vehicle in which to hold the funds will, in part, be influenced by tax considerations - in many circumstances, investment bonds will be appropriate, while, in others, a straightforward portfolio of unit trusts will be suitable.
So, if you want the best advice on investments held in trust, please contact Isis Financial Planners.