What to Expect When You Review Your Trust’s Investments

If you’re a trustee who’s never had a proper review of the trust’s financial position, here’s what that conversation should look like.

Throughout this blog series, we’ve covered a lot of ground. The 45% tax rate that hits discretionary trusts from the first pound above £500. Why the investment wrapper matters as much as the investments themselves. How the 5% withdrawal allowance is a planning tool, not a default income strategy. What happens when segment surrenders go wrong. The differences between trust types that change the entire tax calculation.

If you’ve read all of that and thought “I had no idea it was this complicated,” you’re not alone. That’s the reaction I get from almost every trustee I meet for the first time.

The good news is that you don’t need to become an expert in all of this. You need to find someone who already is. But it helps to know what a proper review looks like, so you can tell the difference between a thorough conversation and a superficial one.

Here’s what I’d expect to happen.

It Starts With the Purpose, Not the Portfolio

The first thing a trust-focused adviser should want to understand is: what is the trust actually for? What are the objectives? What does the beneficiary need?

This sounds obvious, but it’s the question that gets skipped most often. Many trustees arrive expecting to talk about investment performance — which funds are up, which are down, whether the portfolio is beating a benchmark. Those things matter eventually. But they’re meaningless without context.

The trust deed itself usually gives a clear starting point. It sets out what the trust is trying to achieve, who the beneficiaries are, and what powers the trustees have. But the trust deed doesn’t tell you what the beneficiary’s life actually looks like day to day.

If you’re a trustee who was already caring for the beneficiary before you took on the role, you’ll know their needs intimately. What you might not know is how those needs translate into financial decisions inside the trust — how distributions affect benefits, how income is taxed, how different investment structures interact with the beneficiary’s position.

If you’ve become a trustee without that prior caring relationship — perhaps through a bereavement, or because you were named in a will — you might understand money but not understand the beneficiary’s practical needs. That’s a steep learning curve, and a good adviser will help you navigate it rather than skip past it.

Either way, the conversation starts here. Purpose first. Portfolio second.

Understanding What’s Already in Place

The next step is understanding the current position. Not just the investments, but the full picture: what’s in place, what you’ve been told by previous advisers, and what you want.

This is where the issues covered earlier in this series tend to surface.

Often the trust’s investments are held in a General Investment Account. The trustee may not have chosen that deliberately — it was simply the default when the investments were set up. But as we covered in the second post in this series, a GIA inside a discretionary trust generates taxable income every year, taxed at 45%. The trustee is often already feeling the pain of this — not as a technical tax problem, but as frustration with the admin burden and cost of annual tax returns.

The question is whether moving to a more efficient structure makes sense. Sometimes it does, and the long-term savings are substantial. But sometimes the trust has been invested for years, unrealised gains have built up, and the capital gains tax cost of switching would outweigh the benefit. A proper review works through that calculation honestly, even when the answer is “what you’ve got is the least bad option now.”

If an investment bond is already in place, the review should cover how the 5% allowance is being used — or whether it’s being taken by default without any strategic purpose. As we explored in the fourth post, taking 5% annually as a habit can consume optionality that the trust might need later.

Beyond the Investments

Here’s where a trust-focused review differs from a standard investment review.

A good adviser will want to see the trust deed — not to second-guess the solicitor who drafted it, but to understand the powers, the beneficiaries, and any specific provisions that affect how the investments should be managed. The trust type matters. As we covered in the third post, the difference between a standard discretionary trust and a Disabled Person’s Trust changes the tax treatment, the means-testing position, and therefore the investment strategy.

Beyond the deed, there’s a broader health check. Is the trust registered with the Trust Registration Service? Are the trustees meeting their obligations? Is there an accountant filing annual returns? Are the right elections being made — particularly the vulnerable person election, which can reduce the trust’s tax rate from 45% to the beneficiary’s own rate?

These aren’t strictly investment questions. But if they’re not being addressed, the investment strategy is being built on shaky foundations. A trust where the TRS registration isn’t done, or where the VPE1 election hasn’t been made for years, has problems that no portfolio change will fix.

Sometimes I’ll handle these things directly. Sometimes it’s a matter of letting the trustees know what needs doing. And sometimes it needs a solicitor or accountant — in which case I’ll work with whoever they already have, or recommend someone if they don’t.

Coordinating the Professionals

I’ve written separately about why trust management works best as a team effort between solicitor, accountant, and financial adviser. The review is where that coordination either happens or doesn’t.

A trust’s legal structure determines what’s possible. Its tax treatment determines what’s efficient. The investment strategy generates the income and gains that create the tax liabilities. Everything connects.

If the accountant doesn’t know the investment structure is about to change, they can’t plan for the tax consequences. If the solicitor hasn’t been consulted about trustee powers, the adviser might recommend something the trustees can’t legally do. If the adviser doesn’t understand the beneficiary’s benefits position, a well-intentioned distribution could reduce the beneficiary’s state support pound for pound.

None of these professionals can do each other’s jobs. But they need to be talking to each other. Part of a proper review is making sure those connections exist — and if they don’t, building them.

What Happens After the Review

The initial meeting typically takes about an hour. But a trust review isn’t a single conversation — it unfolds over weeks or sometimes months, depending on the complexity. There may be information to gather, professionals to consult, calculations to run, and decisions that need time rather than urgency.

Once everything is in place, the ongoing relationship depends on what the trust needs. At a minimum, a discretionary trust should have annual general meetings where the trustees formally review the trust’s position. For ongoing clients, I do this as part of the relationship. But if more frequent contact is needed — because the beneficiary’s circumstances are changing, or because a significant decision is approaching — then that happens too.

The point is that trust investment management isn’t a one-off transaction. The beneficiary’s needs evolve. Tax rules change. Investment markets move. The trust’s position needs to be monitored and adjusted over time, not set and forgotten.

The Bottom Line

The most common thing trustees tell me after an initial review is that they had no idea how many moving parts were involved. The tax rules, the investment structure, the trust type, the beneficiary’s circumstances, the admin obligations, the interaction between professionals — it’s a lot. And most trustees have been carrying that complexity alone, trying to coordinate it themselves without knowing what they didn’t know.

By the end of the process, the feeling is usually different. They have a plan. They understand why the trust is structured the way it is. They know what’s being done, by whom, and when. The pressure has been removed.

That’s what a proper trust investment review should feel like. Not more complexity. Less.

If you’re a trustee and you’ve read this series thinking “I’m not sure any of this has been looked at for our trust,” that’s the conversation worth having. The starting point is an hour of your time and a willingness to ask the questions.

Everything else follows from there.

The Financial Conduct Authority does not regulate Trusts. The value of investments can fall as well as rise. Professional advice should be sought before making investment decisions.