Trustee Roles and Duties: What Trustees Must Do (and Avoid)

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.

Because the role carries real responsibility, it is sensible to take 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.

TL;DR

• A trustee is the legal owner of trust assets but holds them for the benefit of the beneficiaries.
• The trust deed or will is your rulebook and comes first.
• The Trustee Act 2000 requires reasonable care and skill, with a higher standard expected of professionals.
• Avoid conflicts of interest, treat beneficiaries fairly and keep clear records of decisions.
• Trustees can be personally liable for a breach, even if they are not paid.

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:

1. Administrative: Keeping records, filing tax returns, and distributing funds.
2. Fiduciary: Acting with absolute loyalty to the beneficiaries and avoiding any conflicts of interest.
3. 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

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. Later, in Schmidt v Rosewood Trust Ltd [2003] UKPC 26, the Privy Council (on appeal from the Isle of Man, a decision treated as persuasive in England and Wales) held that disclosure to beneficiaries falls within the court’s supervisory jurisdiction over trusts, so the court can order disclosure where needed to make sure the trust is being run properly.

As a general rule:

1. Transparency is better than secrecy: Beneficiaries should be told the trust exists and what their interest in it is.
2. Basic documents: Beneficiaries are usually entitled to see the trust deed and the trust accounts.
3. 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.

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