Guidance Note for Trustees and Their Advisors
The ongoing management of trusts is sometimes time consuming and complicated. We are happy to work with trustees and their other professional advisors, to assist with this work. We do not provide investment or accounting advice in-house.
We want to work with you to achieve the best services for our clients. The precise duties of a trustee vary according to the type of trust and the terms of the trust documents.
However, the following obligations apply to most trustees:
On being appointed, the trustees should familiarise themselves with the terms of the trust, details of the trust’s assets and check that the trust fund is invested in accordance with the provisions of the trust documents. The trust’s assets should be placed in the names of the trustees or under their control as soon as possible. The trustees should also ensure that the trust assets (e.g. buildings) have appropriate insurance cover.
Trustees should act jointly (unless the trust document specifies that they can act by majority). Trustees are jointly liable for mistakes and should therefore act together. Trustees should not normally delegate functions to each other. Legal advice should be obtained before attempting to delegate trustee functions.
Trustees should keep clear and accurate records of trust assets and be ready to produce accounts to the beneficiaries upon request. Trustees should also allow beneficiaries to inspect non-confidential documents relating to the trust, upon request. Generally, trust accounts do not have to be independently audited, although some charitable trusts will need to have their accounts audited in some circumstances.
Trustees should complete annual tax returns for the trust, if required. Trustees should also consider the tax implications of any proposed action (e.g. payment of capital or income to a beneficiary).
Trustees must act in the best interest of all beneficiaries. They should not favour one beneficiary over others unless the trust documents permit them to do so.
Trustees should obtain and consider expert advice before making or changing trust investments. Trustees should also ensure that the trust’s investments are reviewed periodically.
Trustees should ensure that beneficiaries are kept fully informed of matters relating to the trust. This helps to avoid any disputes.
Trustees should not act beyond the terms of the trust and of its powers.
Trustees are in a position of special trust and responsibility, and must comply with various fiduciary duties explained below.
Trustees must not:
Mix the trust fund with the trustees’ personal assets.
Make an unauthorised profit from the trust fund. Trustees may be reimbursed for reasonable and necessary out of pocket expenses, but apart from this they should not charge for their services unless they are permitted to do so either by the trust document or by statute. The Trustee Act 2000 allows a professional trustee acting in the course of his or her profession to receive payment from the trust fund.
Place themselves in a position where their duties as trustees and their personal interests conflict, or where there is a significant possibility of this happening.
Purchase trust assets. Such a sale can be overturned by the beneficiaries, even if the trustee paid a fair price at a public auction. There is always a real possibility of the trustees’ personal interest in buying at a low price conflicting with their duty to get the best price for the beneficiaries. This rule also applies to trustees who use money from the trust fund to buy assets owned personally by one of the trustees.
Purchase assets from a beneficiary unless the trustees show that they did not abuse their position, that they acted honestly and fairly and disclosed all relevant information to the beneficiary.
Obtain a personal benefit through their position as trustee or through opportunity or knowledge gained from that position. Even if the trustee was not acting dishonestly, they can be liable if the opportunity or knowledge came to them via their position as trustee and they used it to make a profit for themselves rather than for the trust.
This Guidance Note for Trustees and their Advisors is an outline of the duties of trustees generally and is not intended as a substitute for obtaining professional advice in relation to your specific circumstances.