As a trustee you essentially hold property for the beneficiaries of a trust or settlement. In this role, you must carry out duties as set out in the settlement and as laid down by law. You can exercise powers as included in the trust deeds or contained within statute.
The office of trustee
The appointment is a personal one and cannot usually be delegated. As a trustee you must act in good faith and in the best interests of the beneficiaries at all times. Trustees must not allow personal interests to conflict with those of the beneficiaries. For example, a trustee must not benefit from their appointment as trustee save where this is expressly authorised, you cannot make secret profits, and should not purchase trust property.
Can trustees get paid for acting as a trustee?
Not normally, however many trust deeds will include charging provisions whereby professional trustees can charge for acting as trustees. There are also statutory provisions which allow professional trustees to be remunerated.
Payment of trustees can also be permitted where this is agreed by all beneficiaries of the trust. All trustees can be reimbursed for ‘reasonable expenses’ such as travel expenses to attend meetings.
Who can act as a trustee?
Generally anyone with the capacity to hold property:
- Friends and relatives can act, though not minors
- Beneficiaries can also act as trustees
- Bankrupts and anyone convicted of a dishonesty/deception offence cannot act as a trustee of charitable trusts, but can otherwise act as a trustee. However, they may be regarded as ‘unfit’ and may be removed
- A trust corporation (a corporate body permitted to undertake the administration of trusts) can act
- A trust company (set up for the purpose of administering trusts) can act
- Professional individuals can act, and have a higher duty of care than lay trustees
How many trustees should be appointed at any one time?
There is no minimum number, except that where a trust contains land or real property there must to be two trustees or a trust corporation to give a valid receipt for the sale proceeds. There is no maximum number of trustees that can be appointed but, where there is a settlement or trust of land, there should be no more than four.
The appointment and retirement of trustees
The appointment of trustees is initially dealt with in the trust document, whether that is a settlement deed or Will. Additional trustees may be appointed by a correctly drawn deed. Similarly the retirement of trustees and/or the appointment of replacement trustees is usually done by deed. The terms of the trust may include specific provisions setting out who can appoint trustees and should be checked carefully; otherwise there are statutory provisions that cover the position. On occasion, trustees may also be appointed by the court.
The removal of trustees
In certain circumstances, the court may exercise its power to remove trustees, eg. when a trustee has been made bankrupt or is convicted of a dishonesty offence. The trust provisions can also include powers for named individuals to remove trustees. In some circumstances the beneficiaries can also have the power to remove trustees.
Duties of trustees on appointment
- Make sure they are familiar with the terms of the trust and understand them
- Ensure they have copies of the important trust documents so that they can refer to them when they need to
- Make sure all the trust assets are held in the names of the current trustees
Ongoing duties of trustees
- Ensure they comply with the terms of the trust: make sure that the correct beneficiaries receive whatever they are entitled to (be it capital or income), as and when they are entitled to it
- Take control of the trust assets and ensure the assets are preserved for the beneficiaries
- Keep all trust documentation secure and up to date
- Hold regular trustee meetings and ensure that the trust is actively managed, with important decisions properly minuted
- Pursue any debts owed to the trust
- Act impartially between the beneficiaries: a trustee must not invest in assets that are beneficial for a beneficiary to the detriment of another beneficiary
- Take reasonable care and skill: the duty of care for professional trustees is higher than for non-professional (lay) trustees and is set out in case law and statute
- Keep accounts and provide them to the beneficiaries on request, provided beneficiaries are happy to bear the cost of accounts being prepared
- Ensure all tax liabilities are correctly calculated and that payments are made on time
- Provide information to beneficiaries on request, including copies of trust deeds and documents, accounts, and letters of wishes
- Act unanimously when making decisions (except in relation to charitable trusts when decisions can be made by majority)
- Consult beneficiaries when possible
- Act personally rather than delegate their powers, subject to some limited exceptions
- Consider the exercise of any powers given to them under the terms of the trust or by statute carefully, and exercise such powers appropriately. Such powers may include powers of investment and powers to appoint capital to beneficiaries, powers to loan capital to a beneficiary, powers to apply income to a beneficiary, power to buy, sell or mortgage assets.
Breaches of trust
A trustee may be held personally liable if he is found to be in breach of trust. Examples include:
- Failing to invest trust funds appropriately
- Profiting from the trust
- Failing to distribute assets to beneficiaries correctly
Remedies where a breach of trust is found to have occurred
A trustee may:
- Have to compensate the trust personally from their own funds
- Be removed as a trustee
- Be the subject of an injunction to prevent the breach continuing
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