A checklist of the typical duties of a trustee.
Trustee is a legal term which, in its broadest sense, refers to any person who holds property, authority, or a position of trust or responsibility for the benefit of another.
The role of the trustee is an onerous one in terms of administration; they must carry out the powers and duties as required by the trust instrument, and by law.
Trustees owe a fiduciary duty to the beneficiaries and they should act with honesty, integrity, good faith and transparency. A trustee may not benefit from their position, cannot make a secret profit and if a trustee purchases trust property, the transaction is voidable at the option of the beneficiaries. A trustee cannot receive payment for carrying out their duties as trustee (except where authorised to do so by the trust document). However, a professional trustee can charge for their time while lay trustees can normally claim only for out of pocket expenses.
General duties of trustees:
- Duty to comply with the terms of the trust. A duty exists for trustees to understand and to be fully aware of the terms of the trust. This is essential in order to carry out the purpose of the trust.
- Duty to take control of and safeguard the trust property.
- Duty to take reasonable care. A trustee should use the same diligence as a man of ordinary prudence would take in the management of his own affairs or the affairs of someone for whom he felt morally bound to. A higher duty of care is expected from a professional trustee than a lay trustee.
- Duty to act impartially between the beneficiaries. A trustee should not allow one beneficiary to suffer at the expense of a benefit to another beneficiary.
- Duty to keep proper records and accounts and to submit the necessary tax returns on behalf of the trust. There is no general duty to have the accounts audited. Trustees may, in their absolute discretion, choose to have the accounts audited, but not more than once in every three years.
- Duty to act unanimously in any decision they make. However, the trustees of a charitable trust may act by majority rule.
- Duty to act personally. The position of trustee is a personal one and cannot normally be delegated. However, the trustees may delegate most of the administrative function, but not any dispositive powers.
- Requirement to seek advice before exercising the power of investment on setting up the trust fund or review.
- Duty to transfer the trust property and the income to the correct beneficiaries. In the event of doubt as to who are the correct beneficiaries, the trustees should apply to the court for directions.
- Duty to provide information. A trustee must produce, on request, information and documents relating to the trust when required by any beneficiaries who have the right to have the trust administered properly. Trust documents will include the trust deed, accounts, letter of wishes and any legal advice and opinions. The beneficiaries cannot require documents outlining the trustee’s reasons for decision making.
Further guidance regarding the essential duties of charity trustees can be found on the Charity Commission website CC3
Specific guidance for pension scheme trustees can be found on The Pension Regulator website
Article from ACCA In Practice