Duties of Trustees
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Sophie Price
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When setting up or running a trust it’s important to know what the trustees duties are. Trustees are key to administering the trust and its assets, making decisions for the benefit of the beneficiaries. But problems can arise if the trustees don’t agree or aren’t sure what their duties are. This article will explain what trustees are, list their main responsibilities and what the duties are for each type of trust. We’ll also look at what happens if the trustees can’t agree.
What are trustees?
When someone sets up a trust, they will appoint trustees to manage the trust and its assets (a trustee can be an individual or organisation). Trustees have a legal responsibility to administer the trust in accordance with its terms and for the benefit of the beneficiaries. They own the legal title to the assets within the trust and must manage these assets responsibly.
Examples of individual trustees include family, friends or professional advisors such as accountants, lawyers and financial advisors; organisational trustees can be law firms, banks and trust companies that specialise in providing trustee services.
What do trustees do?
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. 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 duties of a trustee?
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.
Do all trustees have to agree?
In most types of trusts, trustees are required to make decisions unanimously. This means that all trustees must agree before any actions or changes can be implemented, ensuring that the interests of all beneficiaries are protected. However, some trust deeds may allow for majority decisions, especially in the case of larger or more complex trusts, such as charitable trusts.
What happens if trustees disagree with each other?
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.
How we can assist with trusts and trustees’ duties
If you are considering setting up a trust or have questions about trustees’ duties, it is crucial to seek expert legal advice to ensure it is the right decision for your circumstances. Speak with our experienced trust and will solicitors to understand your options.
- Fill in our online enquiry form; or
- Call us on 020 7485 8811
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