What is a Trust and What is the Role of a Trustee?

Trusts are often talked about in financial planning conversations but not always well understood. They can sound technical, legalistic, or like something only very wealthy families need to worry about.

In reality, trusts are simply a way of looking after assets for the benefit of others in a controlled, thoughtful and often tax‑efficient way. When used well, they can play an important role in getting your entire financial house in perfect order.

What Is a Trust?

At its most basic level, a trust is a legal arrangement where assets are held by one group of people (the trustees) for the benefit of others (the beneficiaries).

Those assets might include:

• Money or investments
• Property
• Life assurance proceeds
• Business or family wealth

The person who sets up the trust (the settlor) decides how the trust should work. These instructions are set out in a legal document known as the trust deed.

Trusts are commonly used to:

• Protect assets for future generations
• Control when and how beneficiaries receive money
• Provide for children or vulnerable family members
• Support inheritance tax planning
• Ring‑fence assets from future uncertainty, such as divorce or bankruptcy

How Trusts Fit Into Financial Planning

Setting up a trust is rarely a standalone decision. They sit alongside your wider financial plan — your Will, protection arrangements, investments, retirement planning and legacy wishes.

For example, a trust might be used to:

• Hold life insurance proceeds so they can be paid quickly and outside of your estate
• Pass wealth to children while retaining a level of control
• Ensure assets are used for specific purposes, such as education or care
• Align how wealth is passed on with your values, not just tax rules

Used thoughtfully, trusts help ensure that what you’ve built is used in the way you intend, by the people you care about, at the right time.

The Role of Trustees

Trustees are central to how a trust works. They are legally responsible for managing the trust assets and making decisions in line with the trust deed.

Being a trustee is not just an honour — it’s an active responsibility.

Key responsibilities of trustees include:

Acting in the best interests of the beneficiaries – Trustees must always put the beneficiaries first and act impartially if there is more than one beneficiary.

Following the trust deed – All decisions must align with the rules set out when the trust was created. Trustees don’t have free rein — their discretion is guided by the document.

Managing trust assets properly – This includes investing appropriately, keeping assets safe, and ensuring decisions are suitable for the trust’s purpose and timescale.

Keeping accurate records – Trustees must maintain clear records of decisions, accounts and distributions. Transparency is essential.

Understanding tax and reporting obligations – Trusts have their own tax considerations, including income tax, capital gains tax and inheritance tax reporting. Trustees are responsible for ensuring these obligations are met.

Making informed decisions – Trustees are expected to take appropriate advice where needed — legal, tax or financial — rather than guessing or relying on assumptions.

Who Should Act as a Trustee?

Trustees are often family members or trusted friends, but they don’t have to be. In some cases, a professional trustee can add experience, objectivity and continuity.

When choosing trustees, it’s worth thinking about:

• Whether they understand the responsibility involved
• Their ability to act objectively and fairly
• Their willingness to work with professional advisers
• The long‑term nature of the role — trusts can last many years

The right trustees help ensure your intentions are respected long after the trust is set up.

Common Misunderstandings About Trusts

Trusts aren’t just about tax. While tax efficiency can be a benefit, most trusts are created to provide clarity, control and protection.

They also aren’t “set and forget”. Trusts should be reviewed regularly to ensure they still reflect your wishes, family circumstances and wider financial plan.

And finally, trusts don’t replace a Will — they work alongside it. A joined‑up approach is what brings everything together.

Is a Trust Always the Right Answer?

While trusts can be extremely useful, they are not a one-size-fits-all solution.

Whether a trust is appropriate — and what type of trust might be suitable — depends entirely on your individual circumstances. Your family situation, the nature of your assets, your long-term intentions, and the wider structure of your financial plan all matter.

Trusts can have legal, tax and administrative implications, so it’s important that they’re set up for the right reasons and in the right way. For that reason, we strongly recommend taking personalised professional advice before establishing a trust or agreeing to act as a trustee.

Bringing It All Together

Trusts can be a powerful tool in financial planning, but only when they’re used thoughtfully and as part of a joined-up approach.

At Chesterton House, we consider trusts in the context of your entire financial house — alongside your Will, protection, investments and long-term plans. The aim is always clarity, control and confidence, rather than complexity for its own sake.

If you’re considering setting up a trust, already act as a trustee, or simply want to understand whether trusts have a role in your financial plan, we’re always happy to talk things through. Give us a call on 01509 610472 or get in touch through our website.

 

Please note: Tax rules and the treatment of trusts can change, and this article reflects general UK guidance at the time of writing, so it should not be relied upon as personalised tax or legal advice.

 

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FAQs

Trusts in Financial Planning: Common Questions

Do I need a trust?

Not necessarily. Trusts are useful for some families and situations, but not for everyone. Whether you need one depends on your goals, family circumstances and the type of assets you hold. Personalised advice is key.

Are trusts only for wealthy families?

No. Trusts are often associated with significant wealth, but they can also be used for more practical reasons, such as protecting children, managing life insurance proceeds, or supporting vulnerable beneficiaries.

What are the risks of being a trustee?

Trustees have legal duties and responsibilities. If those duties aren’t met — for example, by failing to follow the trust deed or manage assets properly — trustees can be held personally responsible. That’s why advice and good record-keeping are so important.

Can trustees take professional advice?

Yes — and in many cases, they should. Trustees are expected to seek appropriate legal, tax or financial advice where needed. Taking advice is seen as a sensible part of fulfilling the role responsibly.

Do trusts need to be reviewed?

Absolutely. Family circumstances, tax rules and personal priorities change over time. Regular reviews help ensure a trust still does what it was set up to do.

Does a trust replace a Will?

No. A trust works alongside a Will, not instead of one. A well-structured financial plan brings these elements together so they support each other.

Can I change a trust once it’s been set up?

It depends on the type of trust and how it was drafted. Some trusts are flexible, while others are more restrictive. This is another reason why taking advice at the outset is so important.