Are you a trustee to a trust fund? You may be aware that trustees have many duties to the trust fund and the trust\u2019s beneficiaries. One of these duties is a duty to invest the trust property. To help you understand your legal obligations, this article will provide and overview of a trustee\u2019s duty to invest and explain some of the practical implications.<\/p>\n
Most trust property is cash or cash equivalents like shares or money in banks. Ultimately, the goal of all trusts is for the trustees to manage trust property on behalf of the beneficiaries. So, it is in the beneficiaries\u2019 interest for this trust property to grow.\u00a0<\/p>\n
That is why the law places importance on the trustees to invest the property. Notably, trustees have wide powers to invest the trust property, subject to the terms of the trust instrument.\u00a0<\/p>\n
The trust instrument is the document setting out the purpose of the trust and the extent of the trustees’ powers. Unless there are specific limitations on your power as a trustee to invest the trust property, these powers will be governed by certain laws.\u00a0<\/p>\n<\/div>\n
Importantly, you have the power to invest the trust property as if you were “absolutely entitled” to the trust property. In plain language, the law gives you the power to invest the property as if it were your own. This is because the law wants to ensure the trustees of all trusts can maximise the growth of the trust property.\u00a0<\/p>\n
In addition to the general duty of care a trustee owes to the trust and its beneficiaries, a separate duty of care applies to the duty to invest. This duty states that you must exercise the care and skill that is reasonable in the circumstances.\u00a0<\/p>\n
Practically, this means that if you have professional skills related to investment, such as if you are an FCA licensed investment adviser, the law will hold you to a higher standard of care.\u00a0<\/p>\n
Though the law gives you broad powers of investment, there are two limits the law places on these powers:<\/p>\n
You are free to acquire land such as houses and flats outright. This includes both freeholds and leaseholds. However, the land must be in the United Kingdom. You cannot acquire land outside the UK unless the trust instrument specifically endorses this.\u00a0<\/p>\n
If you are loaning money and intend for it to be secured to the land, you must take caution and properly execute the security (i.e. through a legal mortgage). Again, this must be on land in the UK.\u00a0<\/p>\n<\/div>\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n