Trustees — duties & powers

TR.07 Trustees — Duties & Powers

The core duty: the standard of care

Trustees owe fiduciary duties (act in beneficiaries' interests, no conflict, no unauthorised profit) plus duties of competence. The general law duty is to act with the prudence of an ordinary prudent person of business (Speight v Gaunt). The Trustee Act 2000 (TA 2000) s.1 statutory duty of care applies a higher objective standard to listed functions (investment, agents, insurance): take such care as is reasonable in the circumstances, raised for those with special knowledge/skill or who act in the course of a profession.

Key duties

• Duty to invest (TA 2000 s.3): general power of investment — invest as if absolutely entitled, EXCEPT land (s.8 lets trustees buy UK land).
• Standard investment criteria (s.4): suitability + diversification; must review investments.
• Duty to take advice (s.5) unless reasonably unnecessary.
• Duty to act personally but may delegate to agents (s.11), with a policy/agreement for asset-management functions (s.15).
• Even hand between income and capital beneficiaries; duty to act impartially and unanimously (private trusts) unless instrument/statute says otherwise.
• Account & disclose: provide accounts; beneficiaries can see trust documents (court discretion: Schmidt v Rosewood).

Key powers

• Maintenance — TA 1925 s.31: income may be applied for a minor beneficiary's maintenance/education; accumulate the surplus.
• Advancement — TA 1925 s.32: capital advance for benefit. Post-Inheritance and Trustees' Powers Act 2014, the limit is now up to the whole of the presumptive share (formerly one-half) for trusts created after 1 Oct 2014.

Common traps

• s.1 duty of care vs general prudence — the statutory standard only applies to TA 2000 functions and can be excluded by the instrument (Sch 1 para 7).
• Delegation: trustees remain liable but escape liability for an agent if they complied with the s.22 review/supervision duty.
• s.31 default: instrument can exclude/modify it; income contingency.
• Self-dealing rule is strict (voidable irrespective of fairness) vs the fair-dealing rule (purchase of a beneficiary's interest — upheld if fair and full disclosure).
• Distinguish fiduciary breach (no-conflict/no-profit, e.g. Boardman v Phipps) from breach of the care duty.