When someone agrees to act as a trustee, they take on a position of significant legal responsibility. Trustees are entrusted with managing assets for the benefit of others and must act in their best interests. Whether you are considering becoming a trustee or already are one, understanding your duties is essential to avoid serious legal and financial consequences.
In this article, we break down the key responsibilities of trustees and what happens if those responsibilities are breached.
What is a Trustee?
A trustee is an individual (or sometimes an organisation) who holds and manages property, money, or other assets on behalf of others under the terms of a trust deed or Will. Trustees are legally obligated to act in the best interests of the beneficiaries and must manage the trust property with care, honesty, and impartiality.
What are the responsibilities of Trustees?
Whether you are acting as a trustee for a family trust, charity, or estate, you have a set of core responsibilities, including:
1. Act in the Best Interests of the Beneficiaries
Trustees must always prioritise the interests of the beneficiaries over their own.
2. Comply with the Terms of the Trust
Trustees must act strictly according to the trust deed or Will. They cannot make decisions outside the scope of their authority. Any deviation could be considered a breach of trust.
3. Act Prudently and Manage Investments Wisely
Trustees must invest trust property with care and skill. This includes regularly reviewing investments and seeking expert advice where necessary.
4. Remain Impartial
Trustees must treat all beneficiaries fairly, even when their interests conflict. This is especially important in discretionary trusts, where decisions about distributions must be made objectively. Favouritism or bias can lead to legal disputes.
5. Keep Accurate Records and Accounts
Good recordkeeping is a legal requirement. Trustees must maintain accurate financial and administrative records, including accounts, distributions, decisions, and correspondence.
6. Avoid Conflicts of Interest
Trustees must not allow personal interests to conflict with their duties. They should not profit from their role unless explicitly allowed by the trust deed.
7. Act Diligently and Personally
Trustees are expected to actively participate and make informed decisions. Delegating core responsibilities to others is generally not allowed unless authorised.
What happens when Trustees breach their duties?
Many trustees underestimate the seriousness of their role. Failing to meet your responsibilities can lead to severe legal and financial consequences. Here’s what can happen if you breach your trustee duties:
❌ Personal Liability: Trustees can be held personally liable for any losses resulting from a breach of trust. This means they may have to repay funds out of their own pocket.
❌ Removal from the Role: Beneficiaries can take legal action against trustees. Courts have the power to remove trustees, impose penalties, or require the repayment of misused trust funds.
❌ Strained relationships: Disputes with beneficiaries or co trustees can escalate quickly.
❌ Reputational Damage: Even if a breach of trust is unintentional, your reputation could suffer which could be particularly damaging for professional trustees, lawyers, or financial advisers.
How to protect yourself as a Trustee?
If you are acting as a trustee, consider taking the following steps to safeguard your position:
✅ Seek Professional Advice: Especially for complex trusts or investment decisions.
✅ Take out trustee indemnity insurance to protect against personal liability.
✅ Understand the Trust Deed: Read and fully understand the legal document before taking any action.
✅ Keep Detailed Records: Minutes, accounts, and decisions should all be documented.
Final Thoughts
Being a trustee is a serious role and carries real responsibilities. Whether you are managing money, property, or shares, your decisions can have long term impacts on the beneficiaries and on your own liability. Understanding your trustee responsibilities and staying within the bounds of the law is essential to avoid costly mistakes.
If you are unsure about your duties or worried about a potential breach of trust, it’s always best to seek legal advice. In the world of trusts, prevention is far better (and cheaper) than cure!
Next Steps: Get in touch
If you would like to discuss acting as a trustee and need advice or support then please don’t hesitate to reach out to our team of legal experts at John Hodge Solicitors based at our Bridgwater, Bristol, Clevedon, Wedmore, Weston-super-Mare and Yatton offices.
You can contact us either via our website, or by calling us on 0800 097 8611.
Emma Radford-Shayler
Sara Anthony
Harry McCarthy
David Satchell
Isabel Harding-James
Kiranjeet Gharyal