While professional trustees will be well versed in the requirements of a trustee, often non-professional trustees acting for trusts do not fully understand their role and responsibilities as trustees. This article will provide an overview of what it means to be a trustee, the role and duties.
What Is A Trustee?
A trustee is an entity or person formally appointed to manage the assets of a trust for the benefit of its beneficiaries in accordance with the terms of the trust. A trustee owes fiduciary duties to the beneficiaries. These duties are typically set out in the trust deed or provided by Statute.
Main Duties Of A Trustee
Duty to the terms
A trustee must know and adhere to the terms of the trust which are prescribed by the trust deed.
Duty of loyalty
Trustees have a fiduciary duty towards beneficiaries. A trustee must administer the trust solely in the interest of the trust beneficiaries and cannot place his or her interest in conflict with beneficiaries. Trustees should not profit personally from their role as trustees other than a fee which they may receive for their trusteeship.
Duty to manage the trust efficiently
To manage a trust efficiently, a trustee must be very familiar with the terms of the trust, the trust’s assets and liabilities, the circumstances of the beneficiaries and the purpose of the trust. Effective management systems should be in place to ensure that the appropriate decisions are made in a timely manner and taking into account the terms of the trust and the interests of the beneficiaries. This also includes effective communication with related parties and proper record keeping.
A trustee also has a duty to invest prudently on behalf of the trust and should diversify the investment of trust assets in the interest of beneficiaries.
Duty to act personally
Trustees act personally and must be involved in decision-making in respect of a trust. While trustees are typically permitted to engage advisers such as lawyers and financial advisers, the final decision on trust matters should be made by the trustee. In certain circumstances, trustees may delegate powers to third parties by power of attorney or deed of delegation. This must be permitted by the trust deed. For example, delegating powers to an agent to purchase or sell property overseas. The trustee is still obliged to properly instruct and supervise the agent.
Where there is more than one trustee, decisions must be made unanimously unless otherwise permitted by the trust deed.
Duty to consider the beneficiaries
A trustee must act impartially with respect to the beneficiaries by considering all beneficiaries in their decision making. They should also not follow the instructions of the settlor but may give consideration to the wishes of the settlor which are not binding unless included in the terms of the trust.
Duty to account
Unless otherwise provided by a trust, a trustee must keep trust accounts and other records. They must also respect beneficiaries’ rights with regard to requests for trust information, as discussed in on our earlier blog post (Beneficiaries Rights to Trust Information). Generally, beneficiaries have a right to receive information about the trust but not the decisions of the trustee.
Benefits Of A Professional Trustee
Trustees may be held personally liable for breaches of duty and there are many factors to consider before accepting a trusteeship. Managing a trust is not straightforward. The benefit of having a professional trustee cannot be understated and further benefits can be read in our previous articles on trust management.