Being asked to be a trustee is often seen as a compliment, a sign that a friend or family member trusts your judgment and integrity. However, it is important to understand that being a trustee is not an honorary title or a “set and forget” role. It is a serious legal position that carries significant responsibilities and, in some cases, personal liability.
As the Law Society points out, the role of a trustee “carries a lot of responsibility,” and they strongly recommend getting professional advice before agreeing to act. At Judge Law, we see first-hand how a well-managed trust can provide security for generations, but we also see the stress that arises when trustees feel out of their depth.
In this guide, we’ll break down exactly what your duties are, the legal framework you need to navigate, and how to avoid the most common pitfalls.
What a Trustee Is Legally Responsible For
In the simplest terms, a trustee is the legal owner of assets (like property, money, or shares) held for the benefit of someone else (the beneficiaries). While you hold the “legal” title, you do not own the assets for your own benefit. Your job is to manage those assets according to a specific set of rules.
Broadly speaking, your responsibilities fall into three categories:
- Administrative: Keeping records, filing tax returns, and distributing funds.
- Fiduciary: Acting with absolute loyalty to the beneficiaries and avoiding any conflicts of interest.
- Prudential: Managing and investing the trust assets as a “prudent” person would, ensuring they are protected for the future.
Whether you are a family member acting for free (a “lay trustee”) or a professional being paid for your services, the core legal obligations remain the same. However, the law often expects a higher standard of “care and skill” from professionals.
The Trust Instrument Comes First
Before you look at national laws or generic advice, your “bible” is the trust instrument. This is usually a trust deed or the provisions within a will. This document is the rulebook that tells you:
- Who the beneficiaries are: Are they specific people, or a “class” of people (like “all my grandchildren”)?
- What your powers are: Can you sell the property? Can you lend money from the trust to a beneficiary? Can you invest in high-risk stocks, or must you stick to “safe” bets?
- What the conditions are: Do you need the consent of a co-trustee or a “Protector” before making a big decision?
A common source of legal disputes occurs when trustees act on what they think is “common sense” or what the family wants, rather than what the deed actually says. For example, if a deed says a child cannot receive their inheritance until they are 25, a trustee who gives it to them at 21 (because they want to buy a car) has technically breached the trust.
Core Trustee Duties at a Glance
| Duty | Description | Legal Source |
|---|---|---|
| Duty of Care | Act with reasonable care and skill based on your expertise. | Trustee Act 2000 |
| Duty of Loyalty | Put the beneficiaries’ interests above your own. | Common Law |
| Duty of Impartiality | Treat all beneficiaries fairly (no favourites). | Common Law |
| Duty to Inform | Keep beneficiaries updated on the trust’s status. | Schmidt v Rosewood |
| Duty to Invest | Keep trust assets productive and take advice where needed. | Trustee Act 2000 |
Core Legal Duties and the Statutory Duty of Care
While the trust deed is your primary guide, the Trustee Act 2000 provides a secondary layer of rules that apply to almost all trusts in England and Wales.
Reasonable care and skill (Trustee Act 2000)
Section 1 of the Trustee Act 2000 introduced a statutory “duty of care.” It requires you to exercise such care and skill as is “reasonable in the circumstances.”
What is “reasonable” depends on who you are. If you are a lay trustee (a friend or relative), the court looks at what a normal person with your background should know. If you are a professional (like a solicitor or accountant), the court expects a much higher level of expertise.
This duty is particularly important when it comes to investment. Under the Act, trustees have a “general power of investment,” but they must:
- Consider “standard investment criteria” (suitability and diversification).
- Obtain and consider “proper advice” from someone qualified to give it (unless the trust is very small and advice isn’t necessary).
Conflicts of interest and impartiality
One of the strictest rules in trust law is the duty of loyalty. You must not profit from your position as a trustee (unless the deed specifically allows for a fee).
Self-dealing is a major red flag. For example, if the trust owns a house and you, as the trustee, decide to buy that house for yourself, that is a conflict of interest. Even if you pay a fair market price, the transaction could be challenged unless all beneficiaries agree or the court approves it.
Similarly, you must remain impartial. If a trust has a “life tenant” (who gets the income now) and “remaindermen” (who get the capital later), you can’t invest in a way that creates huge income but kills the long-term value of the capital. You have to balance the needs of both.
Decision-Making and Recordkeeping
If a trust is ever challenged in court, your best defence is your “paper trail.” Good trust administration might feel tedious, but it is your safety net.
Trustees should:
- Hold regular meetings: Even if it’s just once a year to review the accounts and investments.
- Keep minutes: Record what was discussed and, most importantly, why a decision was made.
- Keep trust assets separate: Never, ever mix trust money with your personal bank account. This is known as “commingling” and is a fast track to legal trouble.
In discretionary trusts, where you have the power to decide who gets what, documenting your reasons is vital. While you generally don’t have to disclose your private deliberations to beneficiaries, having a record of your thought process proves you acted reasonably if you are ever accused of bias.
Beneficiary Information and Documents
“How much do I have to tell the beneficiaries?” is a question we get asked constantly.
Historically, the “Londonderry principle” suggested that trustees didn’t have to explain their reasons for decisions. However, more recent cases like Schmidt v Rosewood have clarified that the court has the power to order disclosure to ensure the trust is being run properly.
As a general rule:
- Transparency is better than secrecy: Beneficiaries should be told the trust exists and what their interest in it is.
- Basic documents: Beneficiaries are usually entitled to see the trust deed and the trust accounts.
- Deliberations: You usually do not have to show them “letters of wishes” or notes of your private discussions unless a court orders it.
If a relationship with a beneficiary starts to sour, withholding information often makes things worse. If you’re unsure what to share, it’s worth a quick chat with a solicitor to avoid a formal dispute.
Replacing or Removing Trustees
Sometimes, a trustee needs to step down. This might be due to ill health, moving abroad, or simply finding the responsibility too much to handle. Most trust deeds have a section on how to appoint new trustees or how a trustee can resign.
However, things get complicated when a trustee won’t leave, or when the other trustees (or beneficiaries) want them gone because of a breakdown in trust or a breach of duty.
The court has the power under Section 41 of the Trustee Act 1925 to appoint or remove a trustee if it is “expedient” to do so. This usually happens when:
- A trustee has become mentally incapable.
- A trustee has gone bankrupt.
- There is “friction and hostility” that is preventing the trust from being administered properly.
Removing a trustee through the courts is a serious step and can be expensive, so it’s usually treated as a last resort. If you are facing a trustee conflict, we recommend seeking mediation or legal advice early.
FAQs
Q: Can anyone be a trustee?
A: Most adults can be trustees, provided they are of sound mind and not disqualified (e.g., undischarged bankrupts). However, being “able” to do it and being “right” for the job are different things. It requires diligence and a bit of administrative backbone.
Q: Do trustee duties apply even if I’m not being paid?
A: Absolutely. The law doesn’t care if you’re a volunteer or a pro; the duty to protect the assets and follow the deed is the same. You can find more on this in our trusts overview.
Q: Can I be held personally liable for a mistake?
A: Yes. If you breach your duties (for example, by making an unauthorized investment that loses money), you could be required to pay the trust back out of your own pocket. This is why following the drafting of the trust deed is so important.
Q: What is a “Letter of Wishes”?
A: It’s a non-binding document written by the person who created the trust, telling the trustees how they hope the money will be used. You should consider it, but legally, the trust deed itself takes priority.
Q: How long does a trustee role last?
A: It lasts until the trust is wound up or you formally resign. This could be a few years or several decades. Understanding the trust lifecycle is key before signing up.
Q: What happens if there are two trustees and we disagree?
A: Usually, decisions must be unanimous unless the trust deed says otherwise. If you’re at a total deadlock, you may need to apply to the court for directions.
Need Advice on Trustee Duties?
Whether you’ve just been appointed and want to know your next steps, or you’re a beneficiary worried about how a trust is being managed, our team is here to help.
- Speak to a solicitor before accepting a trustee appointment.
- Ask us to review your trust governance and decision-making processes.
- Discuss trustee replacement options if relationships have broken down.
Disclaimer: This article provides general legal information regarding the laws of England & Wales. It is not a substitute for legal advice, and it does not cover tax or accounting implications. For specific guidance, please consult a qualified professional.
