Trustees make sure that the purpose and assets of a trust are taken care of. This means looking after things in a way that benefits both the beneficiaries and the trust or charity.
When you become a trustee, you take on a lot of legal duties and powers. Being a trustee means overseeing how the trust or charity is run, following the rules laid out in its governing documents (like the trust deed or charity's constitution), as well as relevant laws. You have to make sure everything is done according to these rules and laws, manage the resources wisely, and avoid getting into situations where your interests conflict with your duties as a trustee.
In this article, we'll explore what being a trustee involves, including the main responsibilities and how to effectively manage a trust.
Table of Contents
- What are the main duties of a trustee?
- What power does a trustee have in a will?
- What are trustees not allowed to do?
- Who can be a trustee and how are they chosen?
- Can I get help with trustee duties?
- Can a new trustee be appointed?
- Appointment by existing trustees
- What happens if trustees disagree on how to manage a trust?
- What happens if beneficiaries disagree with how a trust is being managed?
- How can Lawhive help?
What are the main duties of a trustee?
As a trustee, your main job is to ensure the trust or charity is well-managed and runs smoothly.
A trustee has the following key responsibilities:
Duty of compliance: Trustees are responsible for ensuring that the trust or charity follows its governing documents and all applicable laws, including charity and statutory regulations.
Duty of care: Trustees must act with care and skill, using their knowledge and experience wisely and seeking professional advice when needed. This duty is especially important for professional trustees, who should apply their specialised skills and knowledge diligently.
Duty to act in the best interests of the beneficiaries: Trustees must prioritise decisions that advance the goals of the trust or charity, free from personal interests. They should avoid conflicts of interest and refrain from gaining personal profit from their position, except for reimbursement of valid expenses.
Duty to manage trust assets responsibly: Trustees should wisely invest and safeguard trust assets, avoiding unnecessary risks, and using them solely for the trust of the charity's objectives. They must also maintain precise records and accounts.
Duty of impartiality: Trustees must balance competing interests fairly and not favour one beneficiary over another unless expressly allowed by the trust deed.
Being a trustee requires integrity, skill, and experience. You have to act fairly, putting the interests of the beneficiaries or the charitable goals ahead of any personal benefits.
What power does a trustee have in a will?
Trustees named in a will, also called executors or testamentary trustees, have powers to manage the deceased’s estate according to the will and laws. They must use these powers carefully, always considering the beneficiaries' interests.
Trustees in a will can:
Distribute assets as per the will
Sell property
Pay debts and taxes
Invest trust assets
Solve disputes
What are trustees not allowed to do?
Trustees must follow strict rules to ensure they act in the best interests of the trust or charity. They must also stick to the terms of the trust deed and legal requirements, or they could face legal action for breaking the trust.
A big rule is that trustees can't use their position to benefit themselves unless the trust deed or law allows it. This means they can't get personal profit or benefit from the trust's assets. Trustees should also manage the trust's assets carefully and avoid risky investments unless the trust allows it.
They must avoid conflicts of interest, and not let their interests affect their decisions.
Depending on the type of trust, trustees might need to agree unanimously on decisions unless the trust deed or law says otherwise.
Who can be a trustee and how are they chosen?
Trustees can be individuals who meet certain criteria and are picked in different ways depending on the type of trust.
Trustees must be:
Over 18 (though for charitable organizations like charitable companies or charitable incorporated organisations, those aged 16 and up may qualify)
Have legal capacity
Free from certain criminal convictions or financial sanctions, like undischarged bankruptcy or disqualification from acting as a company director, unless these disqualifications are specifically waived.
Can I get help with trustee duties?
It is normal for trustees often to seek professional advice from lawyers, accountants, or financial advisors, especially when dealing with complex legal, tax, or investment issues.
This is not only advisable but may be a requirement under the duty to act with care and skill.
As well as professional advice, many organisations offer training programs specifically designed for trustees. These programs can help new trustees understand their roles and responsibilities and keep experienced trustees updated on legal changes and best practices. In the UK, the Charity Commission provides a wide range of guides and resources that can be invaluable for trustees.
Can a new trustee be appointed?
Yes, a new trustee can be appointed through:
Provisions in the trust deed
The trust deed or governing document typically lays out the procedure for appointing new trustees. It might specify who has the power to appoint replacements or add new trustees.
Appointment by existing trustees
In many cases, current trustees have the power to appoint new trustees. This is common practice to fill vacancies created by resignations, retirements, or other departures.
Appointment by the settlor
For some private trusts, the settlor—who establishes the trust—may retain the power to appoint new trustees during their lifetime.
Court appointment
If there is no provision in the trust deed for appointing new trustees, or if the existing trustees cannot agree on a candidate, the court can intervene to appoint a trustee.
Statutory appointment
Some types of trusts, particularly statutory or charitable trusts, might have specific regulations governing the appointment of new trustees.
What happens if trustees disagree on how to manage a trust?
When trustees disagree, they usually check the trust deed first. It should have rules for solving disputes, like needing a majority vote or ways to break ties.
Mediation is another option. It involves bringing in someone neutral to help find a solution without going to court.
If that doesn't work, talking to a trust lawyer can help. They'll explain the rules in the trust deed and the law. If the problem affects the trust or its beneficiaries, going to court might be needed. The court can decide how to manage the trust.
Sometimes, if a trustee keeps disagreeing and it affects the trust, they might have to quit or be removed by other trustees. But that's usually the last step.
What happens if beneficiaries disagree with how a trust is being managed?
Disagreements often happen when beneficiaries don't understand the trust's terms or why decisions are made. They should talk to the trustees first to get clarity because trustees have to be open and provide information.
Beneficiaries should also check the trust documents to make sure the trustees are following the rules. If they think something's wrong, they can challenge it.
Like trustees, beneficiaries can try mediation to solve problems. A neutral person can help them and the trustees talk things out.
If needed, beneficiaries can talk to a trust lawyer to understand their rights. If talking it out doesn't work, they can ask a court to step in and make changes.
In some places, beneficiaries can also complain to a group that watches over trusts. They can investigate and take action if the trustees aren't doing their job right.
How can Lawhive help?
If you are involved in a trust, whether as a trustee or a beneficiary, and need legal support, reach out to us today to draw on the expertise of our network of wills, trust and probate solicitors.
Contact Lawhive today for a free case evaluation and free quote.