Trustees: Ensuring Wishes Are Fulfilled

Trustees are monitored to ensure that the settlor's wishes are carried out by the implementation of a legal written document called a Trust Deed or a Declaration of Trust. This document specifies the details of the trust, including the trustees, beneficiaries, and assets involved. Trustees are legally responsible for managing and administering trust assets in accordance with the trust instrument for the benefit of the beneficiaries. This involves managing investments, distributions, reporting, and administration. Trustees must also maintain the property in the trust, including its structure, exterior, fixtures, and fittings. While there is no specific duty to ensure the safety of a beneficiary residing in the property, it is best practice to act as though a landlord-tenant relationship exists to minimise health and safety risks. Additionally, trustees should obtain appropriate insurance for the property and themselves. Trustee liability insurance, a subset of professional liability insurance, is designed to protect trustees from liability incurred due to errors or omissions in performing their duties. Overall, trustees are expected to exercise their discretion in following the settlor's wishes and must act in the best interests of the beneficiaries and the trust as a whole.

Trustees' legal responsibility to manage and administer trust assets

Trustees have a legal responsibility to manage and administer trust assets, and this role comes with significant duties and liabilities. Trustees are either appointed by the settlor or the court if the settlor fails to appoint someone, or if the appointed trustees fail to carry out their duties. The trustee must voluntarily accept their position and cannot resign without the consent of all beneficiaries or the court.

The trustee holds legal title to the trust property and owes fiduciary duties to the beneficiaries, who hold equitable title. Trustees must distribute the property in accordance with the settlor's instructions and desires, as set out in a trust deed or will. Trustees have three primary jobs: investment, administration, and distribution.

A trustee is personally liable for a breach of their fiduciary duties, which include a duty of loyalty, a duty of prudence, and subsidiary duties. The duty of loyalty requires trustees to administer the trust solely in the interest of the beneficiaries. The duty of prudence requires trustees to be held to an objective standard of care in managing the trust property. Subsidiary rules include the duty of impartiality, the duty not to commingle trust property and the trustee's personal property, and the duty to inform and account to beneficiaries.

Trustees are required to make decisions in the beneficiary's best interests and must put aside personal interests, beliefs, and biases to do what is best for the trust. They are responsible for the safety of the assets, keeping trust assets separate from other assets, and keeping records of all transactions and distributing assets as required. Trustees must also report to state and federal regulators and keep beneficiaries updated.

If there are multiple trustees, they carry dual accountability for their own actions, inactions, and decisions, as well as those of their co-trustees. They must exercise reasonable care, participate in the performance of the trustee's functions, and act by majority decision.

Overall, trustees have a crucial and complex role in managing and administering trust assets, and they must fulfil their legal responsibilities to ensure the trust operates in the best interests of the beneficiaries.

Trustees' liability insurance

Trustees are monitored to ensure that the settlor's wishes are carried out through a trust deed or declaration of trust, which outlines the details of the trust. Trustees are legally responsible for managing the assets in a trust and fulfilling its purpose. They must be willing to put in the time and effort to ensure that the settlor's wishes are carried out and that the assets are managed for the benefit of the beneficiaries.

Trustees Liability Insurance

Trustees liability insurance, also known as trustee indemnity insurance, is a type of insurance that provides financial protection to trustees, directors, governors, committee members, and officers of a charity, club, association, or not-for-profit organisation. It covers individuals in positions of authority if a claim is made against them for committing a wrongful act that damages the organisation. This insurance is designed for those working outside the for-profit sector and covers common risks such as investigations by public bodies and reputational risk.

Trustee liability insurance can help cover costs when defending or settling a range of claims, including fines, compensation claims, and legal costs. It is important for trustees of unincorporated charities or associations, as the boundary between the individual and the organisation is less distinct, and they can be held personally liable for paying debts or meeting contractual obligations.

The amount of trustee liability insurance needed depends on factors such as the size of the organisation, the amount of money it processes, and the nature of its operations. The insurance can be extended to include claims made against the organisation as well as individuals. It is not a legal requirement, but it is a way for trustees to ensure they are fulfilling their duty to protect the charity's assets.

Trustee liability insurance typically covers:

• Investigations by public bodies, including support if an insured person's assets are seized
• Health and safety issues, including corporate manslaughter cases
• Employment tribunals and disputes
• Complaints relating to the administration of pension funds and employee benefit schemes
• Charges related to breaches of duty or trust, negligence, or defamation
• Reputational damage, including certain public relations costs to minimise the impact on the charity

Trustees' duty to act in the best interests of the beneficiaries

Trustees have a duty to act in the best interests of the beneficiaries. Trustees are in a position of trust and confidence and are obliged to act for the benefit of the beneficiaries named in the trust. Trustees must show a high standard of care towards their beneficiaries and must not allow their interests to conflict with those of the beneficiaries. They must also not profit from their trust. Trustees are the legal owners of the assets held in a trust and have a duty to deal with the assets according to the settlor's wishes, as set out in the trust deed or their will. They must also manage the trust on a day-to-day basis, pay any tax due, and decide how to invest or use the trust's assets.

The Trustee Act 2000 lays down key areas of trustee duties and powers, such as a trustee's duty of care, their powers of investment, to appoint nominees and agents, to acquire land, and to be paid for work done as a trustee. Trustees also have a duty to act impartially between beneficiaries. This means that they must treat all beneficiaries fairly and equitably and must not allow one beneficiary to benefit at the expense of another. Trustees must also exercise reasonable care and take all precautions that an ordinary prudent person would take in managing similar affairs.

In addition, trustees have a duty to act personally as they have been chosen by the settlor for their particular expertise or knowledge of the beneficiaries and their affairs. They must also act unanimously when exercising their powers, and they have a duty of confidentiality. Trustees must also disclose information to beneficiaries, keep accounts, and ensure that the settlor's wishes are carried out. Trustees can be held liable for breach of duty, and beneficiaries can seek their removal from office and financial recompense for losses incurred.

To ensure that trustees carry out their duties effectively, it is recommended that they seek professional advice and remain open, fair, and transparent with beneficiaries. Trustees should also communicate with the settlor to understand their expectations and work collaboratively with other trustees to manage the trust effectively.

Trustees' duty to maintain the property in the trust

Trustees have a duty to maintain and protect the property in a trust. Trustees are responsible for collecting and safeguarding the trust's assets, which can include a range of assets such as real estate, securities, and other investments. They must keep the trust property separate from their own and ensure it is used solely for the benefit of the beneficiaries. Trustees are also responsible for investing the trust's assets prudently to ensure sufficient income for the beneficiaries. This includes a duty to diversify investments unless special circumstances dictate otherwise.

In the case of real estate, trustees are responsible for keeping the property in good repair, paying necessary taxes, and ensuring that it is used in accordance with the settlor's wishes. Trustees must also keep accurate records of all transactions, distribute assets as required, and provide regular updates and reports to the beneficiaries.

If there are multiple trustees, they are jointly accountable for their actions and decisions. They must exercise reasonable care and participate in the performance of their functions, and they may be required to compel a co-trustee to redress any breach of fiduciary duty. Trustees can be held personally liable for any breach of their fiduciary duties, which include duties of loyalty, prudence, and impartiality.

To ensure trustees carry out their duties, it is important to choose trustees who are capable and trustworthy. This can include wealth management companies, banks, trust companies, or attorneys specialising in trust administration. It is also essential to have a clear understanding of the trustee's responsibilities and to communicate expectations to them.

Trustees' duty to communicate with the beneficiary

Trustees are legally bound to carry out the wishes of the settlor, as outlined in the trust deed. Trustees are in a position of trust and confidence and are obliged to act for the benefit of the beneficiaries named in the trust. Trustees must show a high standard of care towards beneficiaries and must not allow their interests to conflict with those of the beneficiaries.

Trustee's Duty to Communicate with the Beneficiary

A trustee is a fiduciary, meaning they have a duty to exercise good faith and undivided loyalty towards the beneficiaries. Trustees must act with the highest principles of morality, fidelity, loyalty, and fair dealing. Trustees are required to communicate with beneficiaries and keep them reasonably informed of all actions taken on behalf of the trust. This includes keeping beneficiaries informed about distributions from the trust.

If a trustee is not communicating, beneficiaries can bring a proceeding to compel the trustee to file an account of the estate. The trustee will have to submit an accounting to the court, which includes all information about the estate, such as an itemized list of assets, funds, expenses, and beneficiary distributions.

If a trustee is unresponsive, beneficiaries may need to file a petition in probate court to gain access to information. It is in the trustee's best interest to communicate with beneficiaries to avoid acrimony and the stress and expense of litigation.

As a beneficiary, it is important to remain respectful and avoid being abusive or confrontational when communicating with a trustee. If communication with the trustee is difficult, it is advisable to communicate in writing or hire a lawyer to communicate on your behalf.

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