This glossary defines some common terms you might encounter when dealing with trust bank accounts in the UK.
A
Absolute Entitlement: When a beneficiary has the legal right to receive the trust assets immediately, and the trustee cannot prevent it.
Appointer: The Appointor is the position in a trust that generally has the power to remove a trustee and/or appoint new trustees. Some trust deeds also require that the consent of the Appointor is obtained when the trustee intends to carry out certain powers afforded to it under the trust deed.
Authorised Signatory: Someone other than the trustee who is permitted to access and operate the trust bank account, often with limitations set by the trustee.
B
Bare Trust: A simple trust where the fiduciary duty of the trustee is to immediately transfer the assets to the beneficiary.
Beneficiary: The person(s) who will eventually receive the benefit of the assets held in the trust.
D
Death Certificate: An official document that registers a person's death. A death certificate may be required when dealing with a trust after the settlor's death.
Discretionary Trust: A trust where the trustee has discretion over how and when to distribute the assets to the beneficiaries.
E
Estate: The property, possessions, and other assets of a deceased person. The estate may include assets held in a trust.
F
Fiduciary Duty: A legal obligation to act in the best interests of another party. In a trust context, the trustee has a fiduciary duty to act in the best interests of the beneficiary.
FSCS Protection: The Financial Services Compensation Scheme protects deposits up to a certain limit (£85,000 as of May 10, 2024) in the event a bank fails. Trust accounts may or may not be eligible for FSCS protection depending on the bank and the type of trust.
G
Grantor-Retained Benefit Trust (GRBT): A trust where the settlor retains some benefit from the trust assets. For example, a GRBT might be used to transfer assets while still allowing the settlor to live in a property owned by the trust.
L
Life Interest: An interest in the income generated by the trust assets, but not the capital itself. The life tenant receives the income for their lifetime, and then the capital passes to another beneficiary.
P
Power of Attorney: A legal document that gives someone else (the attorney) the authority to act on behalf of another person (the principal). A power of attorney can be used to grant someone authority to manage a trust bank account, but typically only if the power of attorney was created before the settlor lost mental capacity.
Prudent Investment: The trustee has a duty to invest the trust assets prudently, considering factors like risk, diversification, and the beneficiary's needs.
Probate: The legal process of administering the estate of a deceased person. This may involve identifying and valuing the assets, paying off debts, and distributing the remaining assets to the beneficiaries as outlined in the will (if there is one) or according to the intestacy rules (if there is no will). Trust assets generally do not go through probate.
Protector: A protector is a person who is not a trustee but who is given powers under a trust. The role of a protector is usually considered to be to monitor, oversee or control the administration of the trust by the trustees.
R
Registration of Trusts: In the UK, there is no mandatory requirement to register a trust with a central authority. However, registering a trust can be helpful in certain situations.
Reserve Power: A power retained by the settlor in the trust deed that allows them to change certain aspects of the trust under specific circumstances.
S
Settlor: The person who creates the trust and transfers assets into it.
T
Term of the Trust: The period of time for which the trust is valid, as outlined in the trust deed.
Trust Deed: The legal document that sets out the terms of the trust, including the beneficiaries, trustees, and how the assets should be managed and distributed.
Trustee: The person or institution responsible for managing the trust's assets according to the settlor's wishes. Trustees have a fiduciary duty to act in the best interests of the beneficiaries.
V
Vested Beneficiary: A beneficiary who has a legal right to receive a share of the trust assets at some point in the future. The beneficiary's right may be subject to certain conditions being met.
W
Will: A legal document that outlines a person's wishes for how their assets should be distributed after their death. A will can be used to create a trust. However, assets held in a properly constituted trust generally avoid probate.