Business is booming.

Can I be a trustee if I’m the main beneficiary?

Receive free Advice & Comment updates

My family assets are held in a trust and I am the sole beneficiary. One of the trustees wishes to retire. Am I able — with the other two trustees’ consent — to be appointed a trustee or is there a conflict? What should I consider when deciding whether to be a trustee?

Headshot of Jenny Cutts, partner at Wedlake Bell
Jenny Cutts, partner at Wedlake Bell © Edward Webb

Jenny Cutts, partner and head of the private client team at Wedlake Bell, says the starting point is the trust document itself. Provided there are no specific clauses in the governing trust deed to prevent a beneficiary from acting as a trustee, the other trustees (or any person with the power to appoint trustees) agree and you are capable and fit to act, it is possible for you to take on this role. 

You then need to consider the mechanisms contained in the trust to deal with potential conflicts of interest. Most modern trusts include specific terms to address this. When there are no express provisions, the Trustee Act 2000 and previous legislation set out trustees’ boundaries on how they are to act. There is also a body of case law on trustees’ duties of care to the trust and beneficiaries. Before taking on the role, you must be fully au fait with your underlying duties and responsibilities.

You also need the right skills to administer and make decisions on the assets and strategy of the trust — the complexity involved will depend on the trust asset structure, yours and the future beneficiaries’ circumstances, and the current tax position. In addition to decision-making responsibilities, trustees are required to complete a significant amount of accounting and tax compliance. This is often delegated to solicitors and accountants but you need to understand what you are signing and when to ask questions.

A trustee always has to balance the needs of present and future beneficiaries. As the present beneficiary, you should consider the possibility of conflict between you and other beneficiaries if you are also acting as a trustee, not only when managing the trust but also on a personal level. If there is a risk, it may be advisable to keep independent trustees instead.

This all has to be weighed against the benefits. There are many trusts where a sole beneficiary is a trustee and, together with independent co-trustees, has direct decision-making responsibilities for the stewardship of the trust and its assets for the current and next generation of beneficiaries, this person having invaluable knowledge about the circumstances of future beneficiaries. 

Every trust is different and whether it is appropriate for a beneficiary to act as a trustee will depend on what is in the best interests of the beneficiaries and good governance of the trust. If you are appointed and a conflict of interest does arise then there are procedures you can follow to avoid a breach of trust and protect you from personal liability. In most circumstances, you will be able to retire as a trustee if it is no longer appropriate to act.

Is it worth continuing to be a landlord?

I own and rent out a couple of flats. I am concerned about the new obligations I will face due to the renters reform bill, especially given rising interest rates and energy efficiency requirements. How should I weigh up whether it’s worth continuing to be a landlord?

Headshot of Priya Sejpal, property litigation partner at JMW Solicitors
Priya Sejpal, property litigation partner at JMW Solicitors

Priya Sejpal, property litigation partner in the London office of JMW Solicitors, says being a landlord needs to align with your financial plans, risk tolerance and lifestyle preferences. 

However, you are right to be mindful of the renters reform bill, which will apply to landlords in England. It has now had its first reading in Parliament. Although Michael Gove has recently indicated that energy requirements for landlords might be postponed, it is likely the changes will still be implemented in time, so it remains important to price in the associated costs.

The bill is set to result in significant changes for landlords, some of which could affect your bank balance. First, evictions will be more expensive as landlords will now need to prove a ground to evict, creating an opportunity for tenants to contest the claim.

Second, increasing rent as a tactic to encourage a tenant to leave will be less easy as the section 13 statutory process will be required, meaning tenants will be able to contest the increase before a tribunal. The tribunal will also have discretion to set the new rent to start from the date of the hearing rather than the date of the notice if it will cause hardship; it is likely that tenants will cite hardship if a case has taken months to be heard. 

Landlords will also need to pay to register with the Landlord Redress Scheme and the PRS Database. Therefore, landlords’ net costs will increase alongside the increased cost of borrowing.

Evictions continue to be of concern. The most common ground for eviction is rental arrears. A new Ground 8A has been proposed in the bill, which provides eviction where a tenant falls into at least two months arrears, for at least a day, on at least three separate occasions. Previously, a tenant could defeat this (in the way it was then worded) by reducing the arrears before or on the day of the hearing, even if it was just by £1.

Landlords will be better equipped to deal with antisocial tenants as proceedings can now be brought if a tenant’s behaviour is “capable of causing” nuisance and annoyance, as opposed to “likely to cause”. New grounds allowing a landlord to move in or sell up have been added too.

Our next question

I recently updated my will. I know that once probate is granted, my will becomes a public document and I am concerned that once it becomes public it could cause a rift in my family, particularly regarding how I have decided to divide my estate and some of the charitable organisations to which I plan to leave a legacy. I own property in my sole name and some investments, as well as a fairly valuable collection of antiques. Is there a way to maintain some privacy regarding the distribution of my estate and prevent this information from becoming publicly available?

Many perceive there has been an abolition of “no fault” evictions but in reality, landlords relying on section 21 notices have reasons to evict which are now covered extensively in the amended section 8 regime. Therefore, the difference now is that this reason must be given to tenants.

Overall, it is important to take a holistic view. For example, if you’re owning multiple properties it may be more tax-efficient to operate through a limited company, although you’ll need professional advice from an accountant.

The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.

Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to

Source link

Comments are closed, but trackbacks and pingbacks are open.