Banking for Trustees: Managing Accounts and Assets as a Trustee

Trustees occupy a distinctive position in the financial system. They hold legal title to assets not for their own benefit but for the benefit of beneficiaries, and their relationship with banks and financial institutions reflects that dual character. Understanding the banking obligations that flow from trusteeship — and the options available — is essential for anyone who has accepted a trustee appointment, whether for a family settlement, a charity, a pension scheme, or an offshore structure.

This guide addresses practical trust banking: how to open and operate trust accounts, what investment obligations apply, how AML and reporting requirements work, and what to expect from UK and offshore banking institutions when managing trust assets.

The Trustee's Fundamental Banking Obligation: Segregation

The most important banking principle for any trustee is simple: trust assets must be kept completely separate from the trustee's personal assets. This is not merely good practice — it is a fiduciary obligation that courts have consistently enforced. Commingling trust funds with personal funds is a breach of trust regardless of intention and can expose the trustee to personal liability for any loss that results.

In practice, segregation means:

• A separate bank account in the name of the trust (not in the name of the trustee personally)
• Separate investment accounts for trust investments, held distinctly from any personal investment accounts
• Clear records that distinguish trust income from trust capital (a distinction that matters particularly for discretionary trusts where income and capital may be applied differently)

For professional trustees — trust companies, solicitors acting as trustees, banks with trust departments — this segregation is standard and audited. For individual trustees, particularly lay trustees of family trusts, this standard applies with equal force even if no one is actively auditing compliance.

Opening a Trust Bank Account: What Banks Require

Opening a bank account in the name of a trust requires significantly more documentation than opening a personal account. Banks take their AML obligations seriously in the trust context because trusts are recognised vehicles for complex financial arrangements, and the beneficial ownership structure is not immediately transparent.

Standard documentation requirements at most UK banks:

Trust documentation:

• The trust deed or declaration of trust (the founding document); if the trust was established by will, probate documentation
• For discretionary trusts: a letter of wishes (if available; not always required but useful context)
• Any deed of appointment or retirement of trustees since the original establishment

Trustee identification:

• Certified copies of identity documents (passport or driving licence) for all trustees — not just the lead trustee
• Proof of address for each trustee
• Where trustees are corporate entities: company certificates, articles of association, and identification for directors and ultimate beneficial owners

Beneficiary information:

• Identification of defined beneficiaries (for fixed-interest trusts) or a description of the class of beneficiaries (for discretionary trusts)
• CRS (Common Reporting Standard) classification of the trust and, where relevant, beneficiary reporting information for the bank's AEOI obligations

Account purpose and transaction profile:

• Description of the trust's purpose and intended use of the account
• Expected transaction volumes and values
• Source of funds: how will the initial trust fund be established? Where does the trust's income originate?

At Barclays, HSBC, Lloyds, and NatWest, the trust account application process typically requires in-person attendance at a branch or the submission of original or certified documents by post. Most major banks do not yet offer fully digital trust account opening. Allow two to eight weeks from completed application to operational account.

For private banks — Coutts, Arbuthnot Latham, Weatherbys, and others — the process is more relationship-driven. A private banking client opening a trust account for a family settlement can often arrange it through their existing relationship manager, with documentation handled by their solicitor.

Trustee Investment Obligations: The Legal Framework

The investment of trust assets is not at the trustee's absolute discretion. The Trustee Act 2000 (England and Wales) establishes the framework:

The Statutory Duty of Care (s.1 Trustee Act 2000): trustees must exercise such care and skill as is reasonable in the circumstances, having regard to any special knowledge or experience they have or hold themselves out as having. A solicitor acting as trustee is held to a higher standard than an individual lay trustee; a bank or investment manager acting as trustee is held to a professional standard.

The Standard Investment Criteria (s.4 Trustee Act 2000): when investing trust assets, trustees must have regard to the suitability of investments for the particular trust and the need for diversification. They must keep investments under review.

The Duty to Obtain Advice (s.5 Trustee Act 2000): before exercising the power of investment, trustees must obtain and consider proper advice from someone reasonably believed to be qualified to give it, unless they reasonably conclude that in all the circumstances it is unnecessary to do so. This duty cannot be ignored for significant investment decisions.

The practical implication is that most trustees of substantial trusts should engage a discretionary fund manager (DFM) or at least an investment adviser to manage the investment of trust assets. The DFM would typically operate under a mandate agreed with the trustees, investing across an agreed asset allocation, and reporting regularly. This discharges the investment obligation while ensuring professional management.

Trust Bank Accounts vs Trust Investment Accounts

These should generally be maintained separately:

Trust bank account (current account): holds liquid funds for routine trust expenditures — trustee fees, distribution payments to beneficiaries, professional fees, insurance premiums, property maintenance costs. Should hold only the liquidity needed for near-term requirements; excess cash in a current account is almost certainly not being invested prudently.

Trust savings or deposit accounts: for cash reserves not required immediately but not yet invested. Notice accounts or fixed-term deposits in the trust's name; higher rates than current accounts. Subject to the same investment duty considerations as other trust assets.

Trust investment account (custody account): holds the bulk of the trust's long-term investment assets — equities, bonds, funds, structured products. Held at a stockbroker, DFM, or bank's custody service. Regular reporting to the trustees; clear distinction between income and capital where relevant to the trust terms.

Separating these three layers provides clarity for trust accounting, for beneficiary reporting, and for any subsequent trustee or audit review.

Trust Accounting: Keeping Adequate Records

Trustees are required by law to keep sufficient accounts to allow them to discharge their duty to beneficiaries. The level of formality depends on trust complexity and value, but at minimum:

• A record of all assets held on trust at any given date
• A record of all income received (split by type if relevant: rental income, dividends, interest)
• A record of all capital transactions (asset purchases and sales, additions to capital)
• A record of all distributions to beneficiaries
• A record of all trust expenses

For larger trusts or professional trustee arrangements, specialist trust accounting software is standard: IRIS Trust Accounts is widely used in the UK legal and trust administration profession; Isokon is a specialist alternative for family offices and private trustees. For smaller family trusts, a well-maintained spreadsheet or conventional accounting software adapted for the purpose may suffice, provided the accounts clearly separate trust income and capital.

HMRC Trust Registration: A Compliance Obligation

Since 2017, and significantly expanded in 2022, HMRC requires most UK trusts (and some non-UK trusts with UK assets or UK tax exposure) to register on the Trust Registration Service (TRS). The requirements are:

• All express trusts with a UK tax liability must register
• Since September 2022, most UK-resident trusts must register even if they have no current UK tax liability (unless they meet specific exemptions)
• Non-UK trusts that acquire UK assets or have UK beneficiaries may also need to register

Registration requires: trust name, establishment date, trustee information, beneficial owner information, and details of the trust's assets. The TRS is not a public register — it is accessible only to HMRC and, in certain circumstances, law enforcement.

Annual confirmation updates are required. Penalties apply for non-registration and late filing. If you are a newly appointed trustee or have taken on a trust that has not previously been registered, verify TRS status as a priority.

Access to TRS data is restricted: beyond HMRC and UK law enforcement, third parties can only obtain information by making a "legitimate interest" request, and even then access is limited. The TRS is separate from the CRS automatic-exchange regime — registering a trust does not, by itself, transmit trust data to foreign tax authorities (though the trust's underlying financial accounts may be reportable under CRS in the ordinary way).

Offshore Trust Banking

Many UK-connected trusts are established in offshore jurisdictions — Jersey, Guernsey, the Isle of Man, Cayman, or BVI — for legitimate tax, estate planning, or administrative reasons. Each jurisdiction has its own banking infrastructure:

Channel Islands (Jersey and Guernsey): comprehensive banking sector with major UK banks (Barclays International, Lloyds International, HSBC International, NatWest International, Santander International) alongside international private banks. Jersey Law trusts and Guernsey Law trusts are administered by professional trustees (regulated by JFSC/GFSC respectively). Trust banking is routine and sophisticated.

Isle of Man: similar to Channel Islands; LBI, HSBC International, Barclays, and Isle of Man Bank. Professional trustees regulated by IOMFSA. Active trust administration industry.

Cayman and BVI: primarily used for investment fund vehicles and holding structures rather than personal family trusts. Banking infrastructure exists but is less relevant for the personal trust context.

Offshore trusts are also subject to CRS and, where relevant, FATCA reporting. There is no meaningful banking secrecy for offshore trusts in practice; the structures are compliance-transparent from the perspective of tax authorities in the settlor's and beneficiaries' countries of residence.

Trustee Liability and Indemnity

Trustees acting in good faith and in compliance with their obligations are generally personally protected from trust liabilities. However:

• Trustees can be personally liable for losses arising from breach of trust, including imprudent investment decisions made without proper advice
• Trustee liability insurance is available and prudent for trustees of substantial trusts, particularly lay trustees without professional indemnity cover through another arrangement
• Corporate trustees (trust companies) typically carry professional indemnity insurance as part of their regulatory requirements

The legal framework for trustee investment and banking obligations described in this guide applies in England and Wales under the Trustee Act 2000. Scottish law and offshore law differ in important respects. This guide is general information only and does not constitute legal or investment advice. Trustee obligations are complex and fact-specific — seek independent legal advice before accepting a trustee appointment or making significant decisions about trust assets.

How Global Investments Can Help

Trust structures frequently intersect with international property investment — whether through property-holding trusts, offshore family settlements with UK property assets, or estate planning arrangements involving multiple jurisdictions. Global Investments works alongside specialist trust practitioners, offshore trust companies, and tax advisers to support clients managing internationally complex affairs. We can facilitate introductions to appropriate banking institutions and professional trustees, and coordinate property acquisition, disposal, and management within trust structures.

Contact our team to discuss trust-related property or investment banking requirements.