Duties of a trustee

A trustee is an individual who acts as a caretaker for assets held within a trust. They are responsible for managing the finances of the trust in accordance with the instructions given when the trust was originally created. 

It is important that a trustee understands the duties and responsibilities the role involves, and makes sure they comply with them as a breach could lead to serious consequences, including personal liability. The most important aspect of being a trustee is to act in the best interests of the beneficiary(ies) of the trust.

Why are trustees appointed?

A trust is typically formed when someone wants to leave money or property to a beneficiary but the beneficiary is someone who cannot take responsibility for those assets themselves. For example, someone aged under 18 or someone who lacks capacity may not be able to deal with significant assets.

In cases such as these, a trust can be created. An amount of money will be set aside for use only for the benefit of the chosen beneficiaries. Typically, there will be instructions in the will as to how the trust is to be used and in whose favour. The trustee is the person who determines what to spend the money on, or allocates the money to the named person at the right time. 

What should you do if you are asked to be a trustee of a will? 

It is vital not to jump into a decision about becoming a trustee without taking time to fully understand the role. Being a trustee requires a lot of work and there’s a high likelihood that there will be no remuneration; it’s also a big responsibility and not following duties correctly can lead to personal liability. Another factor to consider is the time involved:depending on the nature of the trust the role could be a long-term commitment. 

It is important to understand that everything you do as a trustee must be for the benefit of the beneficiary. If you have doubts about whether to take on the role it’s a good idea to discuss any concerns with the person who is setting up the trust. 

What powers does a trustee have?

The powers of trustees are set out in the Trustee Act 2000. The aim of this Act is to restrict what a trustee can do with the assets of the estate. The powers the Trustee Act 2000 provide are fairly unspecific but when a trust is actually created, powers can be as specific and narrow as the creator wishes. For example, the trust might stipulate that the trustees are not allowed to invest into any company linked to alcoholic beverages. 

Duties of a trustee

The duties of a trustee can be vast, but here we have reduced them to 10 key duties that should be top of mind when managing the trust and making decisions. 

1. Duty to observe the terms of the trust

It is the trustee’s responsibility to familiarise themselves with the interests of the beneficiaries under the trust, including the powers available in administration of the trust property.  

2. Duty to act impartially between beneficiaries

The trustee will also be under a duty to act in the best interests of all the beneficiaries and one beneficiary must not benefit at the expense of another.  

3. Duty of care

Trustees must take reasonable care when carrying out their role, taking those precautions which any ordinary prudent person in business would take when they are managing similar affairs of their own.  

4. Avoid conflicts of interest

Personal interests must not conflict with the trustee role and trustees must act in the best interests of all the beneficiaries of the trust.  

5. Take control of the trust assets

Trustees must ensure that they have control of all trust assets and take steps to ensure that the assets and any trust documents are secure. 

6. Keep accounts

Clear and accurate accounts must be kept and provided to the beneficiaries if requested. 

7. Prepare tax returns

If tax returns are required, these will be the responsibility of the trustees to prepare. This is likely to only be relevant if property is sold and some of the sale proceeds are invested and returns gained from them.  

8. Take professional advice

Trustees should take professional advice on matters such as tax, investment and the law if they do not have the expertise to deal with these themselves.  

9. Not profit from the trust 

No payment can be received for the work done as a trustee and only reasonable expenses can be reimbursed.  

10. Act unanimously

All decisions must be agreed by all the trustees unanimously. 

As you will see from the above, there is a lot to consider when deciding to be a trustee and it’s extremely important to understand the role and responsibilities before you make a commitment. There is also a lot to manage if you do become a trustee. If you are a trustee and are unsure on what decisions you can make, or you are encountering issues in the administration of a trust, or would like further advice on being a trustee, our specialist team at Birkett Long will be happy to help and provide clear advice. 

Contact [email protected] for further information or advice.