UK Law and Practice Contributed by: Ros Bever, Claire-Marie Cornford, Helen Clarke and Ashley Hill, Irwin Mitchell
tax and regulatory world and where significant wealth is involved. While all trustees are subject to scrutiny and are accountable as fiduciaries (to those intended to ben - efit), professional trustees are expected to meet an enhanced standard of care and due diligence. This is borne out by the approach taken by the courts where there has been a breach of trust, and also tends to be reflected in any express provisions included in the trust deed that provide for indemnification of the trus - tees (so that professional trustees are not absolved in the case of negligence, for example). 6.2 Fiduciary Liabilities Trustees can be held personally liable for breaches of the terms of the trust or of their general fiduciary duty, as well as for mismanagement of the trust. Modern trust deeds often include very wide powers to delegate investment management to third-party advisers and indemnification, save in the case of fraud or negligence, to protect fiduciaries from personal lia - bility – provided they act within their powers, with due diligence and in good faith. It is incumbent on professional trustees to be pro - active about compliance in an ever-evolving tax and regulatory environment – particularly in a cross-border context – and to be mindful of the increased onus on them compared to lay trustees. 6.3 Fiduciary Regulation Trustees have a wide power of investment conferred upon them by statute, akin to those of an absolute owner. However, the exercise of such power is subject to an overarching duty of care to invest prudently – usually with the benefit of suitable investment advice from a regulated financial adviser – and to keep invest - ments under review. Many modern trust deeds explicitly exclude or modify the statutory duties to provide additional flexibility, so that trustees need not strictly balance the interests of capital and income beneficiaries, for example. This is intended to provide flexibility but is always under - pinned by the trustees’ general fiduciary duty to be
guided by what is appropriate in the interests of the beneficiaries. Typically, trustees are also expressly empowered by trust deed to: • appoint investment advisers; • delegate investment management; and • set terms for remuneration and indemnity of advis- ers. The aim is to ensure that there is professional over - sight combined with flexibility with regard to invest - ment strategy. 6.4 Fiduciary Investment The statutory power conferred on trustees is that of an absolute owner, which includes power to trade. This also means that trustees need not diversify and may invest in assets prone to depreciation. Modern trust deeds often make more extensive express provision in this context. It is considered desirable for trustees to be able to adapt their investment strategy to suit the beneficiar - ies’ needs, particularly in complex estates and tak - ing into account the purpose for which the trust was established (to hold shares in a family business, for example, or to hold a property as a residence for a particular beneficiary). It is typical for express absolving provisions to be included in the trust deed permitting trustees holding shares in a business to leave the day-to-day running of it – including decisions over declaration of divi - dends – to its directors, provided the trustees have no knowledge of or any reason to suspect misman - agement or fraud. 7. Citizenship and Residency 7.1 Requirements for Domicile, Residency and Citizenship Domicile Domicile is a common law concept that broadly speaking equates to an individual’s permanent home:
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