Trust Management
What this domain tests
Trust Management tests administration after the trust exists: interpreting the deed, investing, distributing, recording, reporting, and managing risk. Questions often ask what a trustee should do next, what document proves authority, or which control failure is most serious.
Core rules
- Read the deed and governing law first. Powers to invest, delegate, appoint agents, make distributions, and charge fees come from the deed, statute, or court order, not from the settlor's informal wishes.
- Investment duty. Trustees must act prudently, diversify unless unsuitable, review the portfolio, consider liquidity and beneficiaries' needs, and document the policy. A concentrated holding received from the settlor needs a reviewed retention or disposal plan.
- Distribution discipline. Check the beneficiary is within the class, the power permits the payment, and all relevant beneficiaries were considered. Record reasons.
- Asset segregation and custody. Trust assets must be separate from the trustee's own assets and from other trusts; use regulated custody and reconcile holdings.
- Records and reporting. Minutes, accounts, tax filings, and beneficiary communications should be timely and consistent with the deed.
- Risk and conflicts. Identify conflicts, related-party dealings, AML/KYC issues, and unauthorised delegation; escalate and document.
Worked example
A discretionary trust holds £2m, mostly in one listed stock. The income beneficiary asks for a large distribution. The trustee should check the class and distribution power, consider the contingent beneficiaries and liquidity, review the concentration against the investment policy, document the decision, and then pay only if authorised. Paying because the settlor "always wanted" it is a breach risk: a letter of wishes is persuasive, not binding.
Traps
Treating the settlor as client controller; commingling assets; failing to document investment reviews; making distributions outside the class; missing tax or reporting deadlines; and delegating investment discretion without authority.