Negligence threat to solicitor trustees set to increase with duty of care under ActTRUSTS: greater burden on solicitors to act in best interests of beneficiariesSolicitor trustees have been warned that they could face negligence claims if they fail to review investments when the Trustee Act 2000 comes into force.Ian Muirhead, director of Solicitors for Independent Financial Advice (SIFA), said the changes would be most likely to hit long-established firms where solicitor trustees failed to review trust funds for suitability of its investment and diversity.Market estimates suggest that around 35 billion of investments are held in trust funds of which solicitors are trustees.Although the 2000 Act, probably coming into force next month, will permit trustees wider discretion to invest, it will also place a greater burden on them to act in the best interests of the beneficiaries.

Trustees will have to review investments for suitability in the context of the purpose of the trust, check them regularly and take 'proper' advice on investments, including tax advantages.

Constraints on fund investment introduced by the Trustee Act 1961, for example, the need to split funds between narrow and wide-range investments and the bar against delegating responsibility for investment to fund managers, will go.Mr Muirhead said that once the Act comes into force, solicitors will no longer be able to 'get off the hook' by hiding behind stockbrokers.

'Solicitor trustees will have a duty to ensure that funds are invested in a suitable manner, satisfactorily diversified and regularly reviewed,' he said.To help firms, SIFA has re-written its Trustinvest handbook and will be offering training to member firms on the various requirements of the 2000 Act.

The organisation has also co-operated with Legal & General, AxaSun Life, Rothschild Asset Management and Royal SunAlliance Investments to produce packaged investment products appropriate for interest-in-possession, discretionary and accumulation and maintenance trusts.LINKS www.sifa.co.ukSue Allen