Trustee Duties and Responsibilities: A Plain-English Guide

If you have been asked to be a trustee, the short answer is this: you are taking on a legal duty to look after someone else's money or property and to manage it solely for the people who are meant to benefit from it — the beneficiaries. You must act honestly, carefully and impartially, follow the terms of the trust document, invest sensibly, keep proper records, and never put your own interests first. It is a position of considerable trust and responsibility, and the law in England and Wales holds trustees to a high standard.

This guide explains what those duties mean in practice, where the rules come from, and what can happen if a trustee gets it wrong. If you are still deciding whether a trust is right for you, our overview of what a trust is is a useful starting point.

What is a trustee, and what must they do?

A trustee is the legal owner of the assets held in a trust. The beneficiaries are the people entitled to benefit from those assets. This split — legal ownership in one set of hands, the benefit in another — is the defining feature of a trust. The person who created the trust (the settlor) sets out the rules in a trust deed or in their will, and the trustees must follow them.

In broad terms, a trustee must read and understand the trust document, take control of the trust assets, manage them prudently, make distributions in line with the trust's terms, deal with tax and reporting obligations, and act fairly between everyone with an interest. Trustees usually act together and must reach decisions unanimously unless the deed allows majority decisions. You cannot delegate the core decision-making to one person and stop paying attention — every trustee is responsible.

The core duties of every trustee

Trustee obligations come partly from the trust deed itself, partly from centuries of case law, and partly from statute — principally the Trustee Act 2000. Two duties sit at the heart of the role.

The statutory duty of care

The Trustee Act 2000 imposes a statutory duty of care. A trustee must exercise such care and skill as is reasonable in the circumstances. Importantly, the standard is not fixed: more is expected of someone who has, or holds themselves out as having, special knowledge or experience. A professional trustee — a solicitor or a trust corporation — is judged against a higher benchmark than a family member acting in good faith. This duty applies in particular to how trustees invest, how they appoint and review agents and advisers, and how they insure trust property.

Acting in the beneficiaries' best interests

A trustee must act solely in the interests of the beneficiaries and must not profit from the trust or place themselves in a position where their personal interest conflicts with their duty. This is sometimes called the fiduciary duty. It means no self-dealing, no taking a secret commission, and no favouring one beneficiary over another unless the trust expressly allows it. Where a trust has both people entitled to income now and others entitled to capital later — common in a life interest trust — the trustee must hold the balance fairly between them. In a discretionary trust, the trustees have a duty to consider how to exercise their discretion genuinely, periodically and on a properly informed basis, even though no single beneficiary is entitled as of right.

Investment duties under the Trustee Act 2000

One of the most significant practical responsibilities is investment. The Trustee Act 2000 gives trustees a wide general power of investment — broadly, they may invest as if the assets were their own — but that freedom comes with conditions designed to protect beneficiaries.

• Standard investment criteria. Trustees must consider the suitability of each type of investment for the trust, and the need for diversification appropriate to the trust's circumstances. Putting everything into a single shareholding or one buy-to-let property may well breach this duty.
• Proper advice. Trustees must obtain and consider proper investment advice before investing, and at intervals afterwards, unless they reasonably conclude it is unnecessary — for example, where the sums are very small.
• Regular review. Investments must be kept under review and varied where appropriate. A trustee cannot simply set up a portfolio and forget about it for a decade.

Trustees may delegate the day-to-day management of investments to a discretionary fund manager, but only within a written policy statement, and they must monitor the agent. Delegation does not mean abdication — the trustees remain responsible for choosing a suitable agent and keeping an eye on performance.

Record-keeping, accounts and tax

Good administration is not optional. Trustees must keep clear and accurate records so they can show, at any time, what assets the trust holds, what income and gains it has received, and what has been paid out and to whom. Trust money and assets must be kept separate from the trustees' own — mixing the two is a serious failing.

Trustees also carry the tax and reporting load. Most express trusts must be registered on HMRC's Trust Registration Service, and the register kept up to date. Depending on the type of trust, the trustees may need to file trust tax returns and account for income tax, capital gains tax on disposals, and the inheritance tax charges that apply to many discretionary and other relevant property trusts — including a potential entry charge of up to 20% on amounts above the nil-rate band, a ten-yearly periodic charge of up to 6%, and exit charges. Our guide to how trusts are taxed explains these in more detail. Beneficiaries are entitled to see the trust accounts, and trustees should be ready to provide information when reasonably asked.

The risks of getting it wrong

The reason these duties matter so much is that trustees can be held personally liable for a breach of trust. If a trustee causes loss to the trust — by investing recklessly, paying the wrong person, failing to collect in assets, or neglecting tax obligations — they can be ordered to make good that loss from their own pocket, even if they acted honestly. Honest carelessness is still a breach.

Beneficiaries can bring claims, trustees can be removed by the court, and unpaid tax can attract penalties and interest for which the trustees are answerable. Conflicts of interest are a frequent source of trouble, especially where a trustee is also a beneficiary, so any decision touching a trustee's personal interest needs particular care and, often, professional advice. Because the consequences fall on the individual, no one should accept the role without understanding what it involves.

How trustees can protect themselves

The good news is that the risks are manageable with sensible habits. Read the trust deed carefully and keep a copy to hand. Take professional advice on investments and on anything involving tax, and act on it. Document your decisions and the reasons for them — a short note of why you did something is invaluable if questioned years later. Keep trust assets separate, file returns on time, and review the position regularly rather than reactively.

Many well-drafted trusts include a trustee exoneration clause that protects honest trustees from liability for ordinary mistakes, though such clauses cannot excuse fraud or, for paid professionals, negligence. The court also has power to relieve a trustee who has acted honestly and reasonably. Even so, prevention is far better than relying on a court's mercy. If a trust is substantial or complex, appointing or working alongside a professional trustee is often money well spent. Choosing a trustee thoughtfully is one of the most important parts of setting up a trust, and one many people getting a family trust underestimate. Because trust law is technical and the stakes are high, anyone unsure of their position should seek qualified advice before acting.