It’s important for a Trustee to consider whether or not the Trust document requires the beneficiary to receive an income, capital growth or both. If this is the case, you may be required to look at savings or investments on behalf of the beneficiary.
Adroit Financial Planning has a vast amount of expertise when it comes to investment planning on behalf of Trustees and can provide the necessary investment advice and assistance.
What type of investment can be made as Trustee?
There are various types of investments which can be made on behalf of a beneficiary which will be contained within the Trust document. The Trust document may be very restrictive, setting out, for example, that you must only open a savings account. However, there may be scope provided within the Trust agreement to allow you to invest in shares, bonds and other investments. In practice, most Trusts allow ‘wide powers of investment’ and only older arrangements tend to carry restrictions.
Depending on the type of Trust being used, the tax position will vary and it’s important to understand this.
What does a Trustee have to do when making an investment?
Many Trustees are appointed without realising the implications and responsibilities that are attached to the role. This can be made all the more difficult when the assets of the Trust dictate that investment decisions need to be made.
Trustees’ duties and obligations in regard to investments include:
- Ensuring that investments are suitable
- Taking the settlor’s wishes into account (the person who set up the Trust)
- Monitoring investments
- Not hoarding cash
- Taking tax requirements into account
- Regularly reviewing investments
These are just some of the reasons why Trustees prefer to appoint an independent financial adviser to advise and assist when making investments.
Are there risks when making a Trustee investment?
In our opinion, all investments, including traditional deposit accounts, carry a degree of risk. For example, if a deposit account gives you a return of just 2% per year, but the things you have to buy are increasing at a cost of 4% per year, your money is losing value in real terms. This is inflation risk.
On the other hand, if you have a portfolio of shares, the returns over a longer term may well be much better than you would have achieved in a deposit account. However, the values are likely to have gone up and down over the years.
What are portfolios?
When a Trustee wishes to invest, a professional financial adviser can put together an investment portfolio. The financial adviser will carefully consider the Trust, the amount to invest, the investment type and the unique circumstances of the beneficiary before preparing the portfolio which will advise on:
- The potential risks
- The things that need to be considered
- The potential gains
Given each case is completely different, every portfolio is tailored to suit each individual.
I've just become a Trustee for the first time. What do I do?
It can be quite daunting when becoming a Trustee for the first time which is why financial advice from a specialist is often sought. Read our general guide on what to do when you become a Trustee for more information.
How can Adroit Financial Planning help?
Our job is to work with you and find the right balance of investments. Nearly all Trustees will need to retain some money in bank and building society deposits to ensure there are funds for short term spending and any emergencies that may occur.
Where funds are identified as not being needed short term, we’ll explain to you clearly and simply the alternatives that are available to you and advise on an investment plan to best suit your needs. We will then seek to put together a tailored portfolio for you. As we are Independent Financial Advisers, we can research the whole market when deciding on the best investments for you.
We’ll aim to ensure that the portfolio we put together for you meets all your objectives as well as being as tax-efficient as possible. Our recommendation will be detailed to you in a full written personal report which we will explain to you fully.
We have access to extensive research and investment management capabilities which means that your portfolio is being managed on a day to day basis.
Should you require advice from one of our experts, please contact a member of our team on 0800 884 0006 or using the form below: