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Responsibilities of a Trustee

By: J.A.J Aaronson - Updated: 29 Jan 2018 | comments*Discuss
 
Trustee Responsibilities Trust

As the name would suggest, trustees have the most significant responsibilities with regard to the actual management of a trust. When they are appointed by the settlor (that is, the individual who has established the trust), they become responsible for the assets that have been transferred into the ownership of the trust. Thus, the management skills of the trustees are fundamental to the successful operation of the trust.

Fiduciary Duty

The responsibilities of a trustee vary, depending on the nature of the trust itself. However, there are a number of duties that will apply to all trustees, regardless of circumstance. In the first instance, all trustees owe a ‘fiduciary duty’ to the beneficiaries. This is a serious legal responsibility, with a number of implications.

Primarily, a fiduciary duty implies a fundamental ‘duty of care’ to the beneficiaries. This means that the trustees must ensure that there is no conflict of interest between their duty to the trust and any other duties that they may have; furthermore, they must subordinate their own personal interests to those of the beneficiaries.

More specifically, trustees are obliged to act upon the explicit instructions of the trust instrument, if such instructions exist. In the case of express trusts that have been established through a trust instrument, the trustees must act within the bounds established by this document.

In the case of a discretionary trust, however, the trustees will have considerably more freedom regarding their actions. In these cases, the trustees will be expected to act in such a way that they maximise the potential benefit passed on to the beneficiaries.

This will include a responsibility to invest any assets in a suitable fashion; generally this would involve avoiding high-risk investments in favour of safe, steady growth.

Trustees also generally have a responsibility to keep the beneficiaries informed of their activities. Where the trustees and beneficiaries are family or friends, this can obviously be performed informally. However, if a corporation has been appointed as trustee, it would be expected that the beneficiaries would receive regular written updates regarding the performance of the trust.

Liability and Indemnity

In general terms, trustees are expected to act in a prudent, honest fashion, and to ensure that they are constantly acting in the best interests of the beneficiaries, and of the trust itself. This can be a difficult and time-consuming task, particularly in cases in which the trust instrument instructs the trustees to make more complicated investments with the assets.

In return for their loyalty, the trustees are not personally liable for any losses. There are, however, certain significant limitations to this provision. Primarily, this is contingent upon the trustees acting in the manner expected of them.

Furthermore, trustees’ indemnity is limited to the sum of the assets in trust. If, therefore, a trustee makes a poor decision that incurs losses greater than the total assets in trust, they will be held personally liable for the remainder.

Legally, becoming a trustee is a voluntary action; there is no legal right to recompense. However, many settlers choose to make provision in the terms of the trust for payment to be made to trustees, in return for their work – work which can clearly be difficult.

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Trust income from dividends is mandated directed to a beneficiary. Does the beneficiary declare the dividend income on their personal tax return as Trust income in the Trust pages or as personal dividend income. Which is correct!
Scorpio - 29-Jan-18 @ 5:32 PM
An individual has no need to register for Self Assessment but they are a Trustee of a IIP Trust. Are they still OK not to register personally or do they have to? Appreciate the Trust will be registered in its own right.
Scorpio - 29-Jan-18 @ 5:17 PM
BigRich - Your Question:
Our family trust currently has 4 nominated trustees. However, following a disagreement, 3 trustees have asked the fourth to step down and a 4th person has been nominated in his place. The original 4th trustee is refusing to step down, and this whole situation is now dragging on.What actual powers does a NOMINATED trustee have, as opposed to an APPOINTED trustee?

Our Response:
You may need to take court action to remove the trustee if he is not willing to step down. We don't know fo the difference in powers between an appointed and a nominated trustee. Seeking professional advice would be highly recommended here.
EstatesOrTrusts - 7-Apr-17 @ 2:40 PM
Our family trust currently has 4 nominated trustees. However, following a disagreement, 3 trustees have asked the fourth to step down and a 4th person has been nominated in his place. The original 4th trustee is refusing to step down, and this whole situation is now dragging on. What actual powers does a NOMINATED trustee have, as opposed to an APPOINTED trustee?
BigRich - 2-Apr-17 @ 2:07 PM
EbonyHaze - Your Question:
Myself and my daughter are beneficiaries to my grandfather's estate. He died over a year ago. I've heard through grapevine probate has finalised yet I have not been contacted by the executors and told anything about this. I phoned an executor and she hung up the phone on me. How do I find out which solicitor is being used to handle this so I can contact them properly.

Our Response:
Some estates do take a reasonable length of time to administer; if things are straightforward it can be less than 6 months, but more complicated estates can take 6 to 12 months. As a beneficiary of the estate you are entitled to a copy of the estate accounts. If, as a beneficiary, you doubt the executor’s integrity or have some concerns over the way they are handling affairs, in the first instance you should write to the executor asking them for an account of the administration of the estate. If the you're not satisfied with their explanation, you can apply to the court to remove and substitute them as executors. You need to be able to prove to the court that the executors are deliberately mishandling affairs or that they are not competent to be executors.
EstatesOrTrusts - 26-Feb-16 @ 12:16 PM
Myself and my daughter are beneficiaries to my grandfather's estate. He died over a year ago. I've heard through grapevine probate has finalised yet I have not been contacted by the executors and told anything about this. I phoned an executor and she hung up the phone on me. How do I find out which solicitor is being used to handle this so I can contact them properly.
EbonyHaze - 25-Feb-16 @ 8:13 AM
hi. My great Aunt passed away in February,my grandfather was her trustee till he passed away couple years ago. I fortunately was brought up with him from age 2. Since he passed away his son (my uncle) was appointed executor. Who is very dodgy to say the least.I'm mentioned in the will. But as he's moved away I don't no how and where to contact him. Now I no the house sold straight awayfor a large sum It's a lot of monies involved but I'm sat thinking he's got away with it again. How can I find out who solicitor dealing with this. There's so much speculation going about ATM. Such as he's fired the solicitor and is dealing with it his self. What Can I do
johncon68 - 15-Aug-15 @ 9:54 AM
"Please" could you advise Following my concern in a letter to our club trustees as to our trust documents , no reply was recieved but a corresponding letter from our our chaiman arrived several weeks later stating- The legal title is vested in the elected trustees of the club from time to time in accordance with the rules. There is no deed of trust or simular document so far as I am aware having made my own enquires about this over a period of time. As there seems little interest from members in a a request for a new contitution document to replace possible lost trust documents ( in our club stuggling to survive, as others ) should we be concerned. Although I believe there is no law concerning such documents,as there is a valuable property involved, should we have some protection as in the law ? What should be the trustees role in these circumstances
Dave - 13-Jul-12 @ 10:22 AM
I am a beneficiary of my dads will ,who passed 4 years ago , i have had no contact with trustee at all . my step mum lives in estate and i have no idea of my rights ?
tee - 13-Apr-12 @ 2:58 PM
I have been named as a trustee for a friends will. He has excludedboth his brother and his daughter as beneficiaries. What is the legal position if they challenge my friends will?
PIFF - 25-Sep-11 @ 4:08 PM
Good site. Very well laid out and with clearly written articles in plain English. It was very useful in my research into Trusts
PDeV - 26-May-11 @ 9:50 AM
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