The Deputy Prime Minister is in the spotlight over her tax liabilities and her dealings relating to her son’s compensation money which has been put into trust. The latter brings into focus the duty of trustees to manage the assets responsibly for the benefit of the beneficiaries, bearing in mind the purpose of the trust.
Depending on the size and composition of a trust, it may not be wise to tie up trust funds in property ownership if that means leaving nothing to invest to generate an income or profit to meet the beneficiary’s present and future needs.
Trustees must also avoid self-dealing. The core principle is that a trustee cannot be on both sides of a transaction, and this applies even if the transaction appears fair.
Trustees must also ensure that any asset purchased for a trust is made at a fair price. In a transaction like the Deputy Prime Minister’s sale of her 25% share to the trust, a red book valuation should be obtained to ascertain the value of the share to be sold.
Being a trustee comes with significant responsibilities and advice should be taken before dealing with the trust or exercising the powers of a Trustee. The complexities of the aims and objects of the Trust is often overlooked by lay trustees, who believe they are simply making a practical decision but that, under close scrutiny, may not be in the best interests of the beneficiary.
Our Trusts team can advise on the nature and application of trusts and our contentious trust team can advise where there are any concerns as to the correct application of a Trustee’s powers and decision making.