Duties of Trustees
14 Feb 2024 | Sophie Price
Table of Contents
When someone sets up a trust, they will appoint trustees to manage the trust and its assets. The exact duties of the trustees depend on the type of trust they are managing and how it is structured, but some general duties will apply to most types of trust.
What is the role of trustees?
Trustees are legally responsible for managing the trust and its assets in accordance with the terms of the trust. The trustees will also own the legal title to the particular assets which comprise the trust, and must administer the trust for the benefit of the beneficiaries. Their primary role is to obey the rules of the trust and make sure that the assets in the trust are managed responsibly.
What are the main duties of trustees?
The main duties of trustees are to:
- Take reasonable care when carrying out the role of a trustee.
- Avoid conflicts of interest and act only in the best interests of the beneficiaries.
- Act impartially so that one beneficiary does not benefit at the expense of another.
- Comply with the provisions of the trust.
- Take control of the trust assets and preserve their value.
- Keep accurate accounts and provide them to the beneficiaries if requested.
- Complete tax returns when they are due.
- Take professional advice when necessary.
- Act unanimously unless the trust says otherwise.
Do the duties differ depending on the type of trust?
Yes, the duties of trustees will differ depending on the type of trust. For example, with a discretionary trust, the trustees have far greater powers to decide how and when beneficiaries receive funds, or whether they receive funds at all. The duty of impartiality will not normally apply in this case. With an investment trust, the trustees have an additional duty to consider portfolio risk and diversification as well as adhere to any regulatory requirements. With a charitable trust, a majority decision will usually suffice and the trustees do not have to act unanimously.
The exact duties will also vary depending on the specific wording of the trust deed. Trustees have a duty to take legal advice if they are unsure of their obligations.
What happens if trustees disagree with each other?
Most types of trusts require that trustees make decisions unanimously. If trustees do not agree with each other, they should take professional advice from a solicitor with the relevant expertise.
Osbornes can help trustees by examining the trust deed and giving practical advice about its conditions. We can also represent trustees in discussions with other trustees, using negotiation and Alternative Dispute Resolution techniques such as mediation to help find solutions that work for everyone.
What happens if trustees don’t comply with their duties?
If trustees do not comply with their duties, then the beneficiaries can require them to step down voluntarily, or apply to the court for them to be removed. The court has the power to remove trustees for neglecting their duties and can appoint replacements. If a trustee is found to have acted negligently or fraudulently, then they may be personally liable for any losses suffered by the trust and its beneficiaries.
There may also be cases where a beneficiary disagrees with a decision made by the trustees, even though the decision was within their powers and did not contravene the terms of the trust. In such cases, a solicitor can help all parties negotiate an amicable solution and consider the options available when the relationship has broken down.
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