Acting as a trustee involves significant legal responsibility. A trustee is a 'fiduciary' and must act in the best interests of the beneficiaries, must not have a conflict of interest with the beneficiaries, and must not make any unauthorised profit from their position.
This guide provides you with a breakdown of the principal duties of a trustee, their powers and the consequences for a breach of trust.
What are the principal trustee duties?
The key duties of trustees are:
- A duty of care – a trustee must exercise reasonable care and skill when carrying out their role. This includes, for example, a duty to work with fellow trustees (if there are any) and to actively consider and select appropriate investments (upon taking advice as appropriate) which are in the best interests of the beneficiaries. A professional trustee (e.g. an accountant or lawyer) is held to a higher standard of care than a “lay” (i.e. non-professional) trustee.
- To follow the terms of the trust and take control of trust assets – a trustee must be clear on the terms of the trust, comply with its terms and secure all trust assets.
- To act impartially between beneficiaries – a trustee must not favour one beneficiary over another and competing interests should be balanced. For instance, where there is a life tenant with an interest in the income of the trust and other beneficiaries with an interest in the capital - neither should benefit to the detriment of the other.
- To provide information and accounting – a trustee must keep clear and up-to-date accounts for the trust and provide beneficiaries with core information about the trust.
- To avoid conflicts of interest – a trustee should ensure that their personal interests do not conflict with their role as trustee to act in the best interests of the beneficiaries of the trust.
- Not to make an unauthorised profit – the trust instrument may however permit a trustee to charge for their services.
What are the powers of a Trustee?
The powers of trustees are provided by law and will also normally be added to or varied by the trust instrument. Typically they have the following powers:
- Power to invest – a trustee has authority to invest the trust funds having regard to the investments' suitability and the likelihood it will benefit the trust.
- Power of delegation – a trustee is able to instruct professional advisers where necessary and appropriate.
- Power of insurance – a trustee has the power to insure any trust asset against damage.
- Power of advancement – a trustee has discretion to advance capital of the trust to a beneficiary.
- To be paid for their work – where they are a professional trustee, such as a solicitor or accountant.
What are the consequences for a trustee for breach of trust?
Where a trustee is in breach of trust (for example for failing to comply with the terms of the trust or breaching their fiduciary duty) the trustee has a personal liability to pay the trust/the beneficiaries for any losses suffered.
Should you need any further guidance on the above, contact our specialist Will and Inheritance Disputes team on freephone 0800 0931336 or by email at willdisputes@ashfords.co.uk.
