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.
Whether you’re looking at how to invest small amounts of money, or whether it’s larger assets, we’re experienced when it comes to investment planning on behalf of trustees, and can provide the necessary investment advice and assistance.
How do I invest money and what type of investment can be made as a trustee?
For those who may be wondering ‘how should I invest my money?’ or are wanting to learn more about trustee asset management, it’s important to know that there are various types of investments that can be made on behalf of a beneficiary. These will be contained within the trust document.
However, the trust document may be very restrictive. For example, it may state that you can only open a savings account. Despite this, 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.
How to start investing money as a trustee
First things first, it’s important that you understand your obligations.
Many trustees are appointed without realising the implications and responsibilities that are attached to the role, in accordance with the Trustee Act 2000.
This can feel overwhelming, particularly 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
Depending on the type of trust being used, the tax position will vary and it’s important to understand this fully.
Your financial adviser will be able to guide you through any implications and responsibilities that apply to you and will ensure that any decisions are as tax efficient as possible.
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’d have achieved in a deposit account, but the values are likely to have gone up and down over the years.
What is a trustee investment plan?
When a trustee wishes to invest, a professional financial adviser will put together a trustee investment plan. 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. This 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 the individual circumstances.
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 it’s important to speak to a financial specialist wherever possible.
If you’d like to find out more about trustee investments and what to do when you become a trustee, take a look at our guide here.
How can Adroit Financial Planning help?
Our job is to work with you and find the right balance of investments. Many 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 which alternatives are available to you and advise on an investment plan to best suit your needs. We’ll then put together a tailored portfolio for you.
As we’re independent financial advisers, we can research the whole market when deciding on the best investments for you.
We’ll ensure that the portfolio we put together meets all your individual 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’ll explain to you fully.
We have access to extensive research and investment management capabilities which means that your portfolio will be managed on a day-to-day basis.
If you’d like more information about the services we can offer you or your clients, please contact us on 0330 995 6838 or email us at email@example.com