Are you a trustee or been asked to become one? Nowadays many lawyers and accountants are choosing not to become trustees reflecting the risks involved so there’s more chance of you being asked to become one.
Do you what your core duties are? Nowadays the whole area is becoming more litigious and it’s worth remembering what you’re supposed to be doing – the judge won’t forget if you end up in court!
The four fundamental duties of a trustee are to:
1. Know and understand the trust deed and adhere to its terms.
2. Act for the beneficiaries (not the settlor).
3. Ensure that the trust property (the assets) can be identified at any given time and is protected.
4. Act in good faith (which means to not act in self-interest or to profit from the trust)
Each trustee of a trust has these duties. A key practical aspect of these duties is for trustees to be actively involved in decision making and contractual transactions and not just go through the motions once a year at the annual meeting of the trustees or even worse, do nothing at all.
Just supposing you’re asked by a friend (his kids are beneficiaries too as his is wife) to become a trustee. After a while your friend’s marriage goes west and he (together with his soon to become ex-wife) wants the trust’s assets back to start again. Can you oblige your friend or do you have a conflict of interest in that you’re supposed to be looking after the interests of all beneficiaries including the kids? These are the facts of an actual case that ended up in court as the trustees wouldn’t support the settlor or his wife. What would you have done?