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When does an executor become a trustee?
In a previous article, I examined the responsibilities of an executor. Most Wills appoint the same people as ‘executors’ and ‘trustees’. Although the terms are frequently used together, the roles are quite distinct. Here, I clarify when an executor assumes the role of a trustee, along with the responsibilities that come with this role.
What is a trust?
A trust is a legal structure designed to safeguard specific assets and/or their beneficiaries. When a trust is established under a Will, the trustees are tasked with managing the assets held in the trust for the benefit of the beneficiaries.
Common types of trust created by Wills are:
- Trust for a minor – If a person is under 18, they lack the legal capacity to accept an inheritance. As a result, they cannot receive the gift until they reach the age of majority (or occasionally an older age specified in the Will). In the meantime, their inheritance is held in trust.
- Discretionary Trust – The trustees are granted the discretion to determine how, when, and to whom (from a specified group of beneficiaries) the assets held in trust are distributed.
- Life Interest Trust – This type of trust grants an individual the right to the income from the asset(s) held in trust, or to use or occupy that asset, for life. Nonetheless, the asset remains part of the deceased’s estate and is ultimately distributed according to the terms of their Will.
- Property Trust – This is a type of life interest trust concerning the deceased’s share in a property.
What are a trustee’s duties?
Trustees named in a Will have a legal obligation to act fairly towards the beneficiaries and in accordance with the terms of the trust. They must exercise reasonable care and skill, acting impartially and in the best interests of the beneficiaries. Similar to an executor, a trustee can be held personally liable if found to have acted inappropriately. Among their numerous duties are:
- identifying the trust’s assets and keeping them safe.
- reviewing at least annually any investments made from trust assets and seeking financial advice as required.
- recovering debts and any other money owed to the trust.
- keeping and retaining (in a safe place) detailed records, accounts, and receipts to show how they are managing the trust.