The rights of trustees in discretionary trusts: at Coddan Formations Agency, we are experts in establishing all manner of financial trusts and partnerships, including discretionary trusts. However, we are also adept at advising our customers on the specifics of such trusts, and one question we regularly get asked is: what are my rights as a trustee?
In a discretionary trust, trustees are awarded legal ownership of a trust fund by the policyholder and are entrusted to take care of the fund until a claim is made on the policy. In the case of a claim being made, trustees are responsible for deciding which of the trust's beneficiaries payment will be made to, when they will be paid and how much they will receive.
Trustees – who must be sound of mind and above the age of 18 - have the right to use discretionary powers in their role as legal owners of a trust fund's assets. They are somewhat guided in their actions by the wishes of the settlor, but, by nature, discretionary trusts are flexible, and it is a trustee's role to interpret a family's situation when a claim is made on the policy.
If one beneficiary is in dire need of financial help, while another is a multi-millionaire, for example, trustees will need to come to an agreement on whether one is more deserving than the other.
In coming to such a decision, it is the right of each trustee that they are fully informed of all relevant circumstances, so they can make a fair and honest judgment. As far as they possibly can, trustees must act honestly and responsibly in their decision-making, and there must be unanimous agreement among trustees before payments can be made to any beneficiaries.
Trustees are responsible for the proper maintenance and documentation of trust assets and property, and they are also liable for any tax that must be paid on the policy – but not for the actual policy payments.