The role and responsibilities of a trustee

Jul 21, 2022 | Commercial Law, Wills & Estates

Being a trustee can be professionally and personally rewarding but it can also be complicated. You may be a trustee for a charity, a family trust or another kind of legal trust. However, you should be aware that in performing the role there are key legal requirements and trustees must comply with the various Trustee Acts. Trustees who act in breach of their legal duties can be held responsible for consequences that flow from the breach, including financial losses.

The role of being a trustee

There must be at least one trustee of any trust and usually no more than four.

Trustees are the legal owners of the assets being held in trust for the benefit of the beneficiaries. They manage the trust on a day-to-day basis and are required to meet all and any legal obligations such as paying the right tax. They decide whether and how the trust’s assets should be invested or used. The original document, setting up the trust, known as the trust deed or governing document, usually sets out the framework or intention of the trust.

Being a trustee is frequently a voluntary or lay role and you will not receive payment for your work. You can, however, reclaim reasonable expenses that you incur such as travel and childcare – being a trustee shouldn’t mean being out of pocket. However, sometimes professional trustees may also be appointed, and they will usually charge for their time, for example, lawyers or trustee corporations.

Summary of trustees’ main responsibilities

  • You and your co-trustees must make sure that the trust is carrying out the objectives for which it is set up, and no other purpose. You therefore need to know the terms of the trust deed and any directions set out in it.
  • You will need to manage the trust’s resources responsibly. It will be your role to distribute the assets of the trust correctly and maintain the capital of the trust. Where there are trust funds to invest the duty is to provide an income for the beneficiaries so care needs to be taken about where to invest.
  • A trustee owes a fiduciary duty to the beneficiaries of the trust. You must therefore act reasonably and honestly and exercise sound judgement in making decisions and avoid exposing the trust’s assets, beneficiaries or reputation to undue risk.
  • You should act impartially as regards beneficiaries of the trust and balance competing interests. There should not be a conflict of interest between you as the trustee and members or beneficiaries of the trust.
  • You must act exclusively in the best interests of the trust and display loyalty and good faith toward the beneficiaries.
  • You will have to attend and participate in trustee meetings. These may be held several times each year. Appropriate records of such meetings should be kept.
  • You should use your skills and experience but know when to seek appropriate advice from professionals, for example, financial advisers, lawyers, etc.
  • You should act unanimously unless the trust deed states otherwise.
  • You must comply with statutory accounting and reporting requirements, and you must therefore be able to demonstrate that the trust is complying with the law and that there is appropriate accountability to members, beneficiaries and/or staff.

Selecting or becoming a trustee

Obviously, only choose people you can rely on and make sure they agree to the role. Equally, if you are being asked to be a trustee, ensure that you are familiar with what is expected of you and who you will be working with, i.e., the other trustees.

Trustees must be properly appointed and should know how long the appointment lasts. If you are not properly appointed as a trustee your decisions or actions may be invalid, potentially creating disputes or putting assets at risk.

Normally, to be a trustee you should be at least 18 years old. There are reasons you may not be entitled to act as a trustee including:

  • being disqualified as a company director;
  • having an unspent conviction for an offence involving dishonesty or deception (such as fraud);
  • being an undischarged bankrupt (or subject to sequestration in Scotland), or have a current composition or arrangement including an individual voluntary arrangement with your creditors;
  • if you have been removed as a trustee of a charity (by the Charity Commission or the court) because of misconduct or mismanagement; or
  • are on the sex offenders’ register.

Trustees have several obligations and may be personally liable for certain losses if they breach their legal duties. If you are a trustee, it is important to understand the nature of your role and the associated responsibilities, and to seek legal advice if you are uncertain.

If you or someone you know wants more information or needs help or advice, please contact us on (023) 9225 9822 or email [email protected]

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