The following comments relate generally to trustee duties in relation to discretionary trusts. They are intended as general comments only. Any person considering trusteeship should seek specific, tailored legal advice.
WHAT IS A TRUSTEE?
A trustee is a person who holds property on behalf of another or others (the beneficiaries).
WHAT IS A TRUST?
A trust is set up by a settlor. The settlor is the person who transfers assets to the trust. A number of trustees are usually appointed to look after and administer the assets of the trust. Trustees must administer assets in the best interests of the beneficiaries of the trust. The beneficiaries are those who will benefit from the trust. If the trust is a ‘discretionary trust’, the trustees have a pool of potential beneficiaries who they must consider. The trustees must act according to the terms of the trust which are set out in the trust deed.
THE ROLE OF A TRUSTEE
The trustees jointly control the assets of the Trust and must make unanimous decisions about how the assets of the trust are administered. Trustees must act according to the terms of the trust. Being a trustee is an onerous role as there are a number of duties and liabilities upon you. These are set out in the trust deed itself, the Trusts Act 2019 and in Court developed case law.
TRUSTEE DUTIES
Trustees have a number of duties which include the following:
- be familiar with and act in accordance with the terms of the trust.
- know who the beneficiaries of the trust are.
- know the assets and liabilities of the trust.
- ensure proper accounts are kept and annual tax returns are filed if necessary.
- keep all trust documents (including deeds, resolutions, variations and accounts).
- act impartially between all beneficiaries.
- inform beneficiaries that they are beneficiaries of the trust.
- provide certain information requested by beneficiaries.
- not to delegate their duties.
- not to use the trust assets for their own benefit.
- exercise the care, diligence, and skill that a prudent person of business would exercise in managing the affairs of others when investing the trust assets.
PERSONAL LIABILITY
As trusts are a legal relationship rather than a separate legal entity, trustees have personal liability for any obligations the trust enters into.
TRUST MANAGEMENT
It is clear that all trustees must be actively and regularly engaged with what the trust is doing, and unanimously make all decisions in relation to the trust. Under the Trusts Act 2019, trustees are required to be more transparent and more accountable for their actions and decisions, including the information they provide to beneficiaries.
Keam Standen Limited offers a trust administration program which may assist you in managing your duties as a trustee and the effective management of your trust. An annual fee is payable. Please do not hesitate to contact us if you would like further information on our trust administration program.
Last updated: May 2021