Wills and Executors
Towards the end of last year, the Financial Times reported that Lloyds Bank had discovered approximately 9,000 Wills in storage that they did not know they had. Lloyds Bank stored the Wills as part of their ‘Safe Custody’ service, which was closed to new customers in 2011.
As a result, monies and assets could have been distributed to the wrong beneficiaries. Executors may have administered a deceased’s estate using what turned out to be the wrong Will, not knowing that the valid Will was held by the bank.
When you make a Will, you need to choose your executor/s carefully. Why would you choose a bank? Gone are the days when the local bank manager understood you and your family’s affairs. A solicitor perhaps? Increasingly, solicitors are using specialist corporations to act as executors as a precaution against litigation. Once again, meaning that your executors will likely have no understanding of your personal or family circumstances.
So, who should you choose to be an executor? They should be people you trust. They could be friends or family members – unless there is discretion in the Will which could result in conflict. Ideally, they should be younger than the testator, if they do pass on earlier than would be expected you can identify replacement executors in the Will.
Be sure to provide each executor with a copy of the Will and any Letter of Wishes and tell them where the originals are stored. If you don’t feel comfortable telling them this information, then they are probably not the right choice to be your executors.
You have looked after your estate and assets all your life. Make sure you choose the right person/s to look after this when you are gone.
If you need assistance in the preparation of a Will do contact us, as we do provide a Will service for individuals residing in England.
Trusts and Trustees
An executor is the person who has the responsibility of managing and distributing your estate after your death according to the terms of your Will.
The role of a trustee is very different to that of the executor. Trustees will only be needed if a Trust arises under the Will. Trustees are the people responsible for looking after the assets in the Trust for the benefit of the named beneficiaries.
The responsibilities held by trustees are significant. The Trustee Act 2000 legislates how trustees manage and invest the wealth held within Trusts, as well as safeguarding against the abuse of these powers.
The Act requires trustees to exercise their powers with a reasonable level of care and skill. A professional trustee or someone with specialist knowledge is expected to show the highest level of care and skill. A layman acting as a trustee would not be expected to demonstrate the same level of skill. However, they are still bound by trust law and are expected to act prudently.
The recent global market sell-off has resulted in a significant drawdown in capital values across investment portfolios. Similar to the Global Financial Crisis of 2008, most traditional asset classes have fallen in value, albeit most dramatically for equities.
However, due to the understandable concerns surrounding the Coronavirus crisis, unlike 2008, the media attention has been elsewhere. It has been deflected away from investment returns and the consequences felt by many trustee portfolios is either unknown, or has been overlooked.
It is our understanding that it is the trustee’s responsibility to outline the acceptable level of volatility associated with their investment portfolio, in line with the Trust’s stated investment objectives. In our experience, the outcome tends to be one of risk mitigation. Trustees are inclined to favour investment portfolios that limit their equity exposure. We would categorise these investors as “Cautious” or “Moderately Cautious”.
We identified that widely used industry benchmarks associated with these risk categories have already been exceeded in relation to portfolio falls when analysing returns generated within the Global Financial Crisis.
This raises three significant points for trustees to consider if they are to manage trust investments correctly for the trust beneficiaries:
- Are trustees aware of the maximum expected drawdown of the trustee portfolios?
- What affect will this have on the investment objective of the trust?
- What are the trustee’s responsibilities to assess and rectify this?
Current markets are signalling a new pattern in economic activity. The focus on realistic and deliverable returns will be key. This will result in even greater pressure for trustees to deliver the returns to meet stated investment objectives.
It may be worthwhile therefore considering a specialist Trustee Investment Service. One that provides the insight and experience required to meet the requirements of the Trustee Act 2000. Their focus will solely be on the needs of the Trust and the long-term objectives of the trustees. In doing so, trustees can depend on their investment objectives being met, without the need for constant analysis of markets and investment change.
Whether making your own succession plans or overseeing the estate of somebody close to you, it’s important to receive proper guidance and support. If you have any questions in relation to succession planning and how best to use Wills and Trusts to manage your assets, please do get in touch.