ACCA Advanced Taxation (ATX) Practice Exam

Who typically acts as one of the trustees in a trust?

1. The beneficiary of the trust

2. The settlor's lawyer or accountant

3. The government-appointed trustee

4. An independent financial advisor

The correct answer is: The settlor's lawyer or accountant

In a trust arrangement, the role of a trustee is crucial as they are responsible for managing the assets within the trust and ensuring that the terms set out by the settlor (the person who established the trust) are followed. One of the common practices is for the settlor's lawyer or accountant to act as a trustee. This is because these professionals bring a level of expertise and understanding of the legal and financial implications of the trust, which is essential for its proper management. Having a lawyer or accountant as a trustee can enhance the trust's administration due to their knowledge of tax laws, compliance requirements, and financial management. This ensures that the trust operates efficiently and in accordance with both legal standards and the intentions of the settlor. Such professionals can help make informed decisions that align with the best interests of the beneficiaries while adhering to the trust’s terms. In contrast, beneficiaries typically cannot serve as trustees due to potential conflicts of interest and concerns about the ability to remain impartial. A government-appointed trustee may serve in specific situations, such as when there is no suitable private trustee, but this is less common in standard trusts. Independent financial advisors might provide counsel for investment strategies within a trust, but do not usually serve as trustees unless other qualifications are met.