When does an executor become a trustee?

In a recent article, I considered the duties of an executor. Most Wills appoint the same people as ‘executors’ and ‘trustees’. While the terms often appear side by side, the roles are very different.

What is a trust?

A trust is a legal structure to protect certain assets and/or the beneficiaries of those assets. If a trust arises under a Will, the trustees are responsible for looking after 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 someone is under 18, they lack the legal capacity to accept an inheritance. Therefore, they cannot receive the gift until they reach their majority (or sometimes an older age specified in the Will). In the meantime, their inheritance will be held in trust.
• Discretionary Trust – The trustees are given the discretion to decide how, when and to whom (among a specified group of beneficiaries) the assets held in trust are distributed.
• Life Interest Trust – This type of trust gives someone the right to the income from the asset(s) held in trust, or the use or occupation of that asset, for life. However, the asset remains within the deceased’s estate and will ultimately be distributed in line with the terms of their Will.
• Property Trust – This is a type of life interest trust in respect of the deceased’s share in a property.

What are a trustee’s duties?

Trustees named in a Will have a legal duty to act fairly towards the beneficiaries, and in accordance with the terms of the trust. They must exercise reasonable care and skill and act impartially and in the beneficiaries’ best interests. As with an executor, a trustee can be held personally liable if they are 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.