Understanding Your Trustee Duties Under the Trusts Act 2019 | Carlile Dowling

Being a trustee is a significant responsibility. Many trustees accepted their role years ago without fully understanding what it involved. Family trusts often appointed family members as trustees because they were trusted, not because they had expertise in trust administration.

The Trusts Act 2019 changed the landscape. Trustees now have clear, enforceable duties that cannot be contracted out of. Understanding these obligations helps you fulfil your role properly and protects you from personal liability.

Cannot Be Excluded

Mandatory duties: locked in.

The Act establishes five duties that apply to every trustee of every trust. No trust deed can exclude or limit them.

1

s23

Know the terms of the trust

You must know and understand the terms of the trust deed. This means actually reading it, understanding what powers you have, who the beneficiaries are, and what the trust's purposes are.

2

s24

Act in accordance with terms of trust

You must carry out your duties in accordance with the terms of the trust deed. This means following the trust's requirements and exercising powers only as the deed permits.

3

s25

Act honestly and in good faith

You must act honestly and in good faith at all times. This goes beyond simply not lying. It means being transparent, not concealing relevant information, and acting with integrity.

4

s26

Act for benefit of beneficiaries

You must act for the benefit of beneficiaries or to further the permitted purpose of the trust. The beneficiaries' interests come first, not yours.

5

s27

Exercise powers for proper purposes

You must only exercise your trustee powers for the purposes for which they were given. Using trust powers for personal benefit or unintended purposes is a breach.

The bottom line

These five duties form the foundation of trusteeship. Even if your trust deed says otherwise, these duties apply. Breach can result in personal liability.

May Be Modified

Default duties: unless changed.

Additional duties apply unless the trust deed specifically modifies or excludes them. Many older trust deeds don't address them, which means the default rules apply.

Check your trust deed

If your trust was set up before 2021 (when the Act came into force), it may not address these default duties. This means they apply in full unless you've had your deed reviewed and updated.

Invest prudently

s30

Considering risk, diversification, and the needs of beneficiaries when making investment decisions.

Avoid conflicts of interest

s33

Not placing yourself in a position where your personal interests conflict with the trust's interests.

Act impartially

s35

Balancing the interests of different beneficiaries fairly, not favouring one over another without good reason.

Not profit personally

s36

Not gaining any personal profit from being a trustee, beyond any permitted remuneration specified in the deed.

Act without reward

s38

Serving as trustee without payment unless the trust deed specifically allows trustee fees.

A Major Change

Disclosure to beneficiaries.

The Trusts Act creates a presumption that beneficiaries are entitled to trust information. This is a significant shift from past practice.

Basic Trust Information

Must be provided to all adult beneficiaries unless there's a good reason not to:

Confirmation they are a beneficiary
Contact details for trustees
How to request further information

Trust Information on Request

Beneficiaries can request:

The trust deed
Trust accounts and records
Records of trustee decisions
Information about trust property

The days of secrecy are over

Trustees can decline requests in limited circumstances, but must consider the request properly and give reasons for any refusal. Simply refusing to tell beneficiaries anything is no longer acceptable.

Essential Compliance

Record-keeping requirements.

Trustees must maintain proper records throughout the life of the trust. This is not optional. Good record-keeping protects trustees if decisions are later challenged.

How long?

Records must be kept for the entire life of the trust. If a beneficiary later challenges a decision, you need to be able to show what was decided and why.

Records you must keep

Trust deed and any amendments

Records of trust property and investments

Financial statements (income, expenses, distributions)

Records of trustee decisions and reasons

Memorandum of wishes from settlor

Appointments and retirements of trustees

Consequences

Breach of duty: what's at stake.

Trustees who breach their duties can be held personally liable. Understanding the consequences helps you take your role seriously.

Compensation

Compensating the trust for any loss caused by the breach. This comes from your personal assets.

Account for profit

If you made any personal profit from the breach, you must give it to the trust.

Removal

Being removed as trustee, with reputational and relationship consequences.

How to protect yourself

Apply to court for relief if you acted honestly and reasonably

Ensure trust deed includes indemnity provisions

Consider trustee liability insurance

Seek professional advice before uncertain decisions

Document your decision-making process

Keep meticulous records

You are Not Alone

Getting support as trustee.

Being a trustee doesn't mean doing everything yourself. Trustees can seek professional advice and delegate certain functions. In fact, failing to seek advice when you should can itself be a breach.

Investment decisions

Especially for substantial trust funds

Tax compliance

Trusts must file annual returns

Trust administration

Records, accounts, compliance

Major decisions

Selling property, significant distributions

The cost of professional support is a legitimate trust expense. It's better to spend trust funds on proper advice than to make decisions that expose you to personal liability.

Related Services

Learn more about trusts and trust compliance.

Your duties as trustee.