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Can a Financial Advisor serve as a Trustee?

Can a Financial Advisor serve as a Trustee?- Redwood Financial
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Making a Will is essential to protecting your assets for those you leave behind. If you have dependents, you could set out what your wishes are for them in the event of your death, including naming those you wish to be their guardian.

While there is no legal reason that your Financial Advisor cannot be appointed to serve as a Trustee for your Estate, there are many strong and compelling reasons why we always recommend to our Clients that they don’t!

Having made the decision to have a Will drafted, the next big decision you must make is who to appoint as your Trustees. Most of us have plenty of options, from loved ones, close family members, and trusted friends.

But what about a trusted professional like your Financial Advisor?

What are a Trustee’s responsibilities?

A Trustee is someone formally appointed to manage assets of a Trust for the benefit of the beneficiaries and to administer the Trust in accordance with the terms of the Trust.

Appointed Trustees have a legal obligation to work with any Co-Trustee to act in accordance with the Trust’s terms and in the beneficiaries’ best interests. Trustees must act with integrity, honesty and loyalty and act fairly towards the beneficiaries.

The primary responsibilities of a Trustee are:

  • Read the deceased Wishes Letter
  • Notify the Beneficiaries included in the deceased’s Estate Plan
  • Collate all Paperwork
  • Make Investment Decisions
  • Arrange the IOU Loan Notes
  • Arrange the Deeds of Assignments
  • Create and maintain all Trustee Minutes
  • Ensure the correct apportionment of the Trust Assets
  • Notify HMRC – complete Trust Tax Returns

Who can take on the role of a Trustee?

You can choose anyone aged 18 or older to be a Trustee. However, it is important to consider if the person you are appointing has the maturity and capability to take on the role, given the responsibilities and legal obligations of the role we have outlined above.

For example, how will they cope with any potential conflicts with the family dynamics when the Will is revealed?

We would always recommend to our Clients that they appoint someone they know very well, instinctively trust, and who can take on the significant responsibilities that come with the role of a Trustee.

Our number one message to Clients is don’t appoint a professional Trustee unless there is genuinely no other alternative option. And yes, this includes Financial Advisors like ourselves!

When you appoint a professional, you appoint someone who needs to make a living out of their work. That means they will look to charge every time they spend working on your Estate.

In fact, it is in their interest to find reasons to work on your Trust, potentially running up large costs that your beneficiaries will need to fund.

And don’t forget, any professional such as a Financial Advisor will have many other Clients to look after and will not be solely focused on your Estate.

Once appointed, there are only two ways to legally remove a professional from the role. Either you remove them by creating a new Will and Trust and replace them, or your beneficiaries can go to court in the hope that a judge might remove them. Even this is not a guaranteed outcome!

By appointing someone you know well and trust implicitly to carry out your wishes when you pass, you empower them to do right by you, your beneficiaries and fulfil their fiduciary duty.

It also means that they can choose to hire professional help and advice when they need it, typically when a big event happens, such as a birth, marriage or death.

Having the power to hire a professional also means they have the power to hire that professional if they don’t believe they are providing good advice, service or value for money.

What do I need to consider when choosing a Trustee?

There are a number of important things to consider before appointing your Trustees; these include:

  • Their age: too young, and they may lack the maturity and mental stamina to deal with both the emotional loss of a loved one and the complexities of their fiduciary duty. Too old, and they may well pass long before you and so not be around to fulfil their duties.
  • The minimum age is 18 years old, and the person must be of sound mind.
  • Do you believe this person has integrity and a history of trustworthiness that makes them a great choice to serve as Trustee?
  • It helps if they are known to and respected by the beneficiaries of your Estate
  • A close family member can make an ideal Trustee
  • You may have other family members like cousins that you have a close relationship with who would happily serve as Trustee
  • A Beneficiary of your Will can be ideally placed to undertake your Trust Management, as it is in their interest to ensure the Trust Administration is accurate and legal.
  • If you have a family business, ensuring a trusted family member working in the firm is a Trustee of your Estate can be very helpful, especially when it comes to dealing with the business Trust Assets of that firm.
  • You may have a long-standing and trusting relationship with a close friend that you may also which to consider appointing as a Trustee or Successor Trustee
  • In an exceptional situation where you have no one available to you that meets the above criteria, you should consider appointing a professional such as your Financial Advisor to look after your Trust Assets. You should approach this cautiously and understand who you are dealing with, their fees and processes and any evidence of past performance with other Clients. As well as Financial Advisors, Estate Planning Experts or Solicitor firms could fulfil this role.

FAQs

How many Trustees can I have?

If a Trust contains Property or Land, a minimum of two and a maximum of four Trustees can be appointed to act; however, you can appoint a successor Trustee or multiples thereof in the Will.

This is because no overreaching conveyance can be effected without the signatures of fewer than two Trustees of Land.

Further, a sole Trustee cannot give a valid receipt for the proceeds of sale or other capital money which arises under a Trust of Land as that also requires at least two Trustees.

There is no limit on the number of Trustees you can appoint to Trusts that do not contain Property or Land. However, we recommended you appoint between two and four Trustees in case the Trust deals in land at a later date.

It is common for executors of a Will to also be appointed as the Trustees, although separate Trustees can be appointed.

Can I be related to a Trustee?

Yes! In fact, we always recommend to our Clients that they choose close family as Trustees to look after their Trust Assets when they have died.

Conclusion

Appointing your financial advisor, or any other professional for that matter, can seem like a logical step to take at first glance, particularly if they are the ones who have worked with you to draft your Will and any supporting Trusts.

However, there are far more potential disadvantages than advantages in doing so.

Trust the people you know best to do the right thing by you and for you when the time comes.

Help your loved ones and beneficiaries manage your estate efficiently and cost-effectively, without the need to illicit billable advice and authorisation from a professional.

For more information

Ready to start your Estate Planning journey? At Redwood, we offer FREE professional Estate Planning advice through our Online Wills, Trusts & Estate Planning Webinar, as well as a complimentary Will Review Service for those who need to have their existing documents reviewed and updated.

If you would like to know more or would like to speak to someone about your planning needs please complete our contact form and our team will be in contact soon!

Jasmine Lambert Chartered Financial Planner
Jasmine Lambert

Jasmine is the Managing Director and a Chartered Senior Financial Planner at Redwood Financial. She helps clients manage and grow their wealth and protect their estate. Jasmine also provides expert advice in our FREE Redwood Webinars, where you can learn more about Wills, Trusts and Estate Planning.

Redwood Financial is one of the south’s leading Investments, Pensions, Wills, Trusts & Estate Planning providers and we are dedicated to helping families to grow, protect and enjoy their wealth. With our unrivalled knowledge of Estate Planning, Lasting Powers of Attorney, Probate, Pensions, Savings & Investments, we can advise on any situation.
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