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Investment Management for Trusts – Trustee Responsibilities

This information is aimed at professional trustees, such as solicitors and accountants, as well as unpaid trustees (such as friends and family). It may also be of use to those who have an interest in a trust, such as beneficiaries. The Trustee Act 2000 is important as it removed the restrictions placed on many trusts by previous legislation, and also imposed a statutory duty of care on trustees which must be taken into account when making investment decisions.

What are the main provisions of the Trustee Act 2000?

The Act applies to England and Wales, and separate legislation exists in Scotland.

The main provisions allowed for the modernisation of the statutory trust powers. In practice, most modern trusts that are set up by solicitors will have powers equal to or greater than the minimum requirements set out in the legislation. However, the Act regulates situations where this is not the case. This could apply to older trusts, charitable trusts, and trusts arising from intestacy.
The main provisions are:

A statutory duty of care for trustees
General powers of investment
The power to acquire land
The power to delegate certain functions
The power to insure trust property
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The duty of care for trustees

Although this duty can be modified or excluded by the trust instrument, it exists to protect the interests of the beneficiaries.

Where a trustee carries out the powers of the Act, or those granted by the trust deed, under Section 1  he must exercise:

such care and skill as is reasonable in the circumstances having in regard  in particular –
(a) to any special knowledge or experience that he has or holds  himself out as having; and

(b) if he acts as trustee in the course of a business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession.

Thus, a higher degree of care applies to professional trustees. What is reasonable will depend on the circumstances of the trust.

The general power of investment
The Act removed restrictions imposed by earlier legislation. There now exists a more general power of investment.

Usually this means that the trustees can make use of a much wider variety of investments. In practice this means all types of collective investment such as unit trusts, OEICs, investment trusts and investment bonds, as well as property and bank accounts, according to the needs and taxation of the trust.

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