Trustees’ duties: What are they and what happens if you breach them?

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Trustees’ duties: What are they and what happens if you breach them?

What is a trust and what are they used for?

Before looking at the duties of a trustee, you might be wondering what a trust is and what they are used for. In simple terms, a trust is a way of managing assets (money, investments, land or buildings) for people. Trusts are set up for a variety of reasons; however, they are often used to pass on assets when someone dies or when someone is too young handle their affairs. The role of a trustee is to manage that trust as the legal owner of the assets held in trust.

General Duties

In having the authority to manage that trust, there are a number of key duties which apply to trustees generally. (There are a number of additional duties for certain trustees, such as those of a charity for instance, but these are not considered here.)

The general duties of trustees are:

1) To observe the terms of the Trust

It is the trustees' responsibility to familiarise themselves with the interests of the beneficiaries under the trust and the trust instrument, including the powers available to them in the administration of trust property. The trustees should also familiarise themselves with the assets held by the trust.

2) To act impartially between the beneficiaries

Trustees are under a duty to act in the best interests of the beneficiaries. One beneficiary must not benefit at the expense of another and so trustees must:

  • Treat beneficiaries of the same class equally
  • Treat beneficiaries of classes fairly

3) To act unanimously

Unless the terms of the trust state otherwise, the trustees must act unanimously and not as individuals or by majority.

4) To provide information and keep accounts

It is a fundamental principle of trust law that a beneficiary must be able to enforce the trust and to make the trustee account for their conduct in the administration of the trust. In order to do so, the beneficiary must receive sufficient information about the trust assets.

Furthermore, one of a trustee's duties is to be ready with their accounts. Trustees should generally provide beneficiaries with the trust accounts upon request and need a very good reason to refuse to disclose them.

5) Duty not to profit from the trust

A trustee may not profit from their trust. A trustee is not to obtain any indirect or incidental profit or gain by reason of the fact that they are a trustee. The existence of the rule is an attempt to prevent a trustee from placing themselves in a position where their personal interest and their duty may come into conflict.

However, the present law does permit trustees to be remunerated in certain circumstances. The 3 most significant of these are where the trust instrument so provides, where payment is authorised by statute and when ordered by the court under its inherent jurisdiction to secure the good administration of trusts.

Breach of Duty

Where a trustee is in breach of their duties or responsibilities, the beneficiaries of the trust can apply to the court to have that trustee removed even if they themselves are a beneficiary. The recent High Court judgment in the case of Manton & ors v Manton, which was discussed in Alison Parry’s blog on 23 February 2021 (here), highlighted the importance of the fiduciary duties owed by trustees.

Similarly, the court can also appoint replacements for any trustee that they remove for neglecting their duties and can provide direction as to how the trustees should correctly administer the trust.

We can help

At JMW we understand that there are a number of complexities involved in managing a trust and our lawyers are on hand to assist you. Whether you want some advice on your duties and responsibilities or need help in resolving a dispute with another trustee, then seeking advice at the earliest possible opportunity is essential.

If you would like to speak to us about how we can help, please call us on 0345 872 6666 or contact us complete the form found on this page.

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