Frequently Asked Questions

The society of Trust and Estate Practitioners (STEP) have explained the traits you should look for when choosing a trustee for your estate.

‘Choosing a trustee to manage your estate when you are gone is an important decision, and one that should not be taken lightly. Depending on the type of trust you are creating, the trustee will be in charge of overseeing your assets and the assets of your loved ones. Most people choose either a friend or family member, a professional trustee such as a lawyer or an accountant, or a trust company or corporate trustee for this key role. Here are some considerations in making this critical decision.

What traits should you look for in a trustee?

As the name goes, the trustee should be trustworthy. If you cannot trust the individual to hold $100 for you, you should not name him as trustee. If your brother-in-law makes a living day trading, steer clear of him. And if your sister-in-law lives paycheck to paycheck, let’s bypass her, too. 

If you choose a family member or friend, he should be financially astute, and good with money. You want someone who is, at a minimum, familiar with basic concepts of investing, and preferably someone who has assets of their own that they are investing with an investment advisor.

Your sister does not have to be a financial guru, but she should be smart enough to know that she cannot directly invest the money herself. As trustee, she will hire an investment advisor to invest the trust assets, or work with your current investment advisor.

 

What should I look for when choosing a trustee?

If you’re thinking about setting up a trust, either to take effect in your lifetime or after your death, you need to take care when choosing a trustee.

In setting up a trust, you are giving up ownership of the assets, and signing them over to the trustee. The trustee will then take responsibility for managing the money or assets that you have set aside in the trust for the benefit of someone else (the beneficiaries). The trustee must use the money or assets in the trust only for the beneficiary’s benefit and everything the trustee does must be done in the beneficiary’s best interests.

Clearly, with such an important responsibility, it is essential to choose the right person to act as trustee.

Who can be a trustee?

As a general rule, anyone over the age of 18 can be a trustee. But you will want to be very careful about who you give the power and responsibility of trusteeship to.

Many people appoint a trusted family member or friend for trusts that take effect after their death. For trusts that take effect in your lifetime, you can appoint yourself and your spouse/civil partner/partner as trustee(s) if you wish, so that you retain some control over the assets and the decision-making power, though you must exercise this for the benefit of the beneficiaries.

How many trustees should there be?

Two or three are preferred. Four is the maximum (unless it is a charity), and only one trust corporation is needed.

Must I appoint a professional trustee?

You do not need to appoint a professional trustee, but this can be helpful if the others are unfamiliar with the obligations of the role. Alternatively, you can appoint family or friends and they can take advice from a professional trustee as and when necessary.

What do I need to think about when choosing a professional trustee?

If you decide to use a professional trustee, make sure you do some research before you sign up with them.

• How long has the company been trading?
• Are they regulated by any professional body/bodies?
• Have they signed up to any professional codes?
• Do they have a good reputation?
• Are their charges reasonable?
• Do they have professional indemnity cover, or other protection in place?
• Who are the directors? Check their credentials and background

You should take your time and shop around to ensure you are completely comfortable with the company before you make a decision.’

Choosing a Guardian … Getting it right 

In the unfortunate event of your untimely demise, choosing a guardian would undoubtedly be one of the many difficult decisions you would have to make. 

You can elect to have a single guardian or a couple or indeed up to four people as guardians. Always bear in mind that the greater the number of guardians, there is always a chance of contentious issues arising.

If you die without making a will or without appointing a guardian in your will (provided, that there is no surviving parent with ‘parental responsibility’) your child becomes the responsibility of the Court. Until such time as the Court appoints a guardian, your child may be taken into care.  

However, if a guardian has been appointed, then responsibility for your child’s care passes on the second parent’s death to that guardian. The guardian is likely to be a person known to the child or perhaps someone such as a step-parent who has been living with the child.  

How do you choose a guardian?

A guardian is a person who will effectively ‘step into the shoes’ of a deceased parent to take over the responsibility for the child. A legal guardian is responsible for the wellbeing and safety of the child under their guardianship. This includes making sure they are fed, clothed, sent to school and are looked after in the same way they would be if their parent or parents were around to do so. 

It is sensible to include a guardianship clause in your will rather than leaving the decision to a Court.

There are number of advantages to appointing a guardian:

1. You have the choice as to who you would like to care for your child rather than leaving the decision to a court of law;
2. You can give your child emotional security in knowing who their guardian would be in the unfortunate event of you being unable to take care of him/her;
3. You can discuss your wishes for your child’s upbringing with your chosen guardian and leave him or her a detailed letter of your wishes; 
4. You can discuss your choice with your family and pre-empt any dispute about who should care for your child after your death.  

 Who can appoint a guardian?  

 A guardian can be appointed by any parent with ‘parental responsibility’ or by a Court. Once a guardian ‘steps into the shoes of the parents’, they obtain ‘parental responsibility’.  

The concept of parental responsibility is defined in the Children Act 1989 (England and Wales)* as being:

“All the rights, duties, powers, responsibilities and authority which by law a parent has in relation to a child and his property.”  

 A person with parental responsibility has the right to make important decisions such as a child’s education, place of residence and medical treatment amongst other issues. 

Who has automatic parental responsibility?  

The following parents automatically have parental responsibility:  

1. Parents who are married when their child is born; 
2. Unmarried mothers; 
3. Unmarried fathers who are named on the birth certificate where the birth was registered on or after 1 December 2003; 
4. Anyone who has a residence order in their favour. 

Fathers who were not married to the mother at the time of the child’s birth and whose birth was registered before 1 December 2003 do not automatically have parental responsibility, even if they subsequently marry the mother. These fathers can receive parental responsibility by agreeing and signing with the mother a formal document known as a Parental Responsibility Agreement. If the mother does not agree to grant parental responsibility then the father can apply to the Court to request a Parental Responsibility Order.  

Choosing the right guardian 

Choosing the right guardian is a personal decision and differs with each person. Each parent will have their own beliefs and priorities regarding the care of a child and it is these considerations which are at the heart of choosing a guardian.  

However, there are a few basic points to bear in mind when choosing your child’s guardian:

1. Is your prospective guardian old enough (you must choose someone over 18 years old)?;
2. Is your prospective guardian?;
3. Do you trust your guardian to raise your child as you would have wished?;
4. Will your guardian’s lifestyle be able to accommodate your child?;
   1.  If not, are they prepared to make changes? 
5. Does your guardian have children the same age?; 
6. Does he or she have experience of parenting?;
7. Is your chosen guardian fit enough to cope with the demands of a child over a number of years, particularly a young child?;
8. Is your guardian known to your child?;
9. Do they get on well together?;
10. Does your guardian have a genuine concern for your child’s welfare?
11. Does your guardian get on well with other members of your child’s family?
12. Does your guardian live locally?;
13. Will your child have to move school?
14. Will your guardian come to live in your home?;
    1.  If not, do they have suitable accommodation for a child?; 
15. Is there likely to be a dispute over your choice of guardian?;
    1. If so, is your guardian prepared to deal with it?; 
    2. Is there another choice you could make to avoid such a dispute?;
16. If you (or you and your partner) are choosing more than one guardian, will they be able to work well together?;
17. Is it clear with whom your child will live if more than one guardian?;
18. Does your guardian share those values which are important to you – perhaps in relation to religion or education? 
19. Have you discussed the proposed appointment with the guardian and established that he or she would be willing to accept the appointment if the time comes? 

Other relevant matters to take into account

It is important to take into account other pertinent factors when choosing your guardian. Factors around financial arrangements must be considered carefully if your appointed trustees are different from your appointed guardians.

It would be sensible to consider the following:

1. If you are considering setting up, or have set up, a trust for your child, either in your lifetime or in your will, you should ensure that the following issues are considered:
   1. How will your child’s upbringing be paid for?;
   2. Is money to be held in trust for the child beyond the age of 18?;
   3. Will your chosen guardians also be the trustees of your child’s fund? ;
      1. If not, can the guardians work well with the trustees? 
      2. Do you wish to make a direct gift to the guardian for his or her own benefit? 
   4. If you own a property, is it to be sold after your death? 
      1. If not, how is its maintenance to be paid for?
   5. What can the trustees spend your child’s money on before he/she reaches 18?  
   6. Have you written a letter of wishes to your trustees and is this up to

For further information and clarity please contact Bavani Naidu of Whitefield Law at bnaidu@whitefieldlaw.co.uk

Co-ownership of a Property

When you purchase a property whether it is a main residence or an investment property you would have to decide at the time of registration which type of joint ownership you want to register.

You can co-own a property either as ‘joint tenants’ or ‘tenants in common’. 

The way you own a property can affect what you can and cannot do with the property if your relationship with the joint owner breaks down or dies.

Joint tenants

As joint tenants (also referred to as ‘beneficial joint tenants’):

• you have equal rights to the whole property;
• you will not each have a quantified share in the property, meaning you cannot decide what to do with ‘your share’ as each will own an undefined share of the whole property;
• the property automatically goes to the other owners if you die;
• you cannot pass on your ownership of the property in your will. It passes by survivorship in accordance with the law and is known as the ‘right to survivorship’;
• if you sell the property, it will be presumed that all the owners own the property equally regardless of your respective contributions as at time of purchase;
• married couple or those in civil partnership commonly use this method of ownership as the right to survivorship is straightforward; 
• this type of ownership can tie the hands of the owners when it comes to effective tax planning and mitigation of Inheritance Tax;
• it is not an effective way method to co-own property if you have a family from an earlier marriage and you wish to leave your interest in the property to them instead of your co-owner; and 
• it is also not advisable if one of you has made a larger contribution to the purchase price of the property and you would want this to be recognised if the property is sold or if you separate.

You should be aware that if you decide to hold the property as joint tenants:

• either party can sever the joint tenancy without the other’s agreement; and
• the joint tenancy may be severed automatically in several situations, including where one party becomes bankrupt.

Tenants in common

As tenants in common:

• you can own different shares of the same property meaning each person will own specified defined shares;
• the property does not automatically go to the other owners if you die and there is no right of survivorship;
• you can pass on your share of the property in your will;
• you can own unequal shares if you have made unequal contributions to the purchase price of the property. This may sometimes be desirable for tax efficient reasons eg. if one person pays a larger proportion of the mortgage repayments or the costs of any major works to the property you may want your shares to reflect this;
• You can pass your shares to another person during your lifetime or on death through your will;
• if you do not have a will when you die, your share will pass in accordance with the rules of intestacy
• if you have children from a previous relationship and would prefer them to inherit your interest on your death rather than your co-owner;
• you have the ability of protecting your share of your assets on death and ensuring that your share goes down the lineage to your beneficiaries and not subject to dilution if your spouse or civil partner remarries;

Issues related to joint property ownership

As joint buyers, you also need to think about the following issues:

• If you are entering into a mortgage, it is advisable to take out a suitable life assurance policy to cover repayments of the mortgage if one of you dies before you pay off the mortgage.
• It is important to make a will (or to review your existing wills) so that the property passes in accordance with your wishes. This is particularly important if you hold as tenants in common at the time of death.

Although a maximum of four Trustees can be appointed in a will Trust, a single Trustee can be appointed. It I s usually recommended that you appoint at least two trustees. Not only does this avoid problems when a single Trustee is unable to conduct their duties, if the trust property includes any land, at least two Trustees will be needed for legal reasons, example at least two trustees are needed to give valid receipt for capital monies arising under a trust in sale proceeds.

Further, if you have one trustee then the potential for manipulation of trust funds could potentially occur. If you have two trustees then there would be some control over the trust funds. However, if your appointed trustees do not get along , that could potentially cause an impasse. This question is dealt with specifically in the next question.

It is imperative that your appointed trustees have been properly considered in your Will. Appointing family and friends can sometimes mean that there will be personality differences, cultural and social differences which would dictate their decisions, their relationships with their co-trustees and off course their relationship with the beneficiaries. 

If you believe that your appointed trustees could potentially reach a stalemate which would hamper the trust administration , you should consider an independent third party like a professional trustee.

If your trustees do not get along you can :

1. 1. Request a meeting with the trustees to discuss the matter 
   2. Instruct a solicitor to assist you and have a round table discussion 
   3. Consider mediation 
   4. Make a court application

It is sensible to appoint replacement trustees to ensure that you have a continued line of approved trustees to manage your trust assets. It will give you peace of mind to know that in the unfortunate event of your first appointed trustee/e cannot accept for any reason (retirement, death, disability, mental illness, incapacity) then your replacement trustee/s will act in substitution.

The procedure for appointing or replacing trustees should be done in accordance with the terms of the trust/governing documentation. In the absence of an express term in the trust deed, there are statutory provisions governing the appointment and replacement of new trustees.