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Trustees’ Duties and Liabilities Under The Trusts Act 2019

December 2020

This is the third article on the new Trusts Act 2019 with the first article having appeared in the Winter edition and the second article having appeared in the Spring edition of this newsletter.


The imposition of duties on trustees is essential to the concept of a trust.  Without such duties, trustees could do as they please with the trust property.


The Trusts Act 2019 (“the Act”) contains various provisions relating to trustees’ duties and the limitation of liability that are likely to be of great importance to trustees, both of existing trusts and those created after the Act comes into force on 30 January 2021.


Many of the duties referred to in the Act were already part of the law established over many years.  However, the Act introduces the concept of mandatory duties and default duties.  The Act also incorporates a range of other duties, notably in relation to the retention and disclosure of trust information to beneficiaries that have been discussed in previous articles.  

 Mandatory Duties

As the name suggests, mandatory duties must be performed by the trustees and cannot be modified or excluded by the terms of the trust.  Those duties require trustees to:

  • Be familiar with the terms of the trust;
  • Act in accordance with the terms of the trust;
  • Act honestly and in good faith;
  • Hold the trust property and otherwise act for the benefit of the beneficiaries in accordance with the terms of the trust;
  • Exercise their powers for a proper purpose.


The above duties are not new and are what have been regarded as core trustee duties for many years. 

 Default Duties

Default duties are duties that will apply to trustees, unless they are expressly modified or excluded by the terms of the trust.  The default duties require trustees:

  • To act with reasonable care and skill, having regard to any special knowledge or experience that the trustee has or claims to have or, in the case of professional trustees, in accordance with the reasonable standards to be expected of a person having that professional expertise.
  • To invest prudently, and in the case of professional trustees, in accordance of the standards reasonably expected of a person of having such expertise.
  • Not to exercise the power of a trustee directly or indirectly for their own benefit.
  • To actively and regularly consider whether or not they should be exercising their powers under the trust deed.
  • Not to commit trustees to a future exercise or non-exercise of their discretion.
  • To avoid conflicts of interest.
  • To act impartially.
  • Not to make a profit from their trusteeship.
  • To act for no reward.
  • To act unanimously.

 Modification or Exclusion of Default Duties

Any of the default duties can be modified or excluded entirely by the terms of the trust deed.  In the case of most family trusts, it will be necessary to modify the default duties to at least some extent. This is because those establishing family trusts often intend to be trustees and also among the categories of discretionary beneficiaries of the trust.  Therefore, they will need to modify the duty not to benefit from the trust.  Failure to do so would mean that they could not benefit from the trust.  


In cases where it is intended that a professional trustee be involved in the trust, the duty to act for no reward will likely need to be excluded if the professional trustee is expected to take on the role of trustee.


Furthermore, many settlors establishing trusts may not want their trustees to incur personal liability simply because they make an honest mistake or a judgement call that proves to be incorrect.  

Limitation of Liability and Indemnity of Trustees

As a general rule, trustees are personally liable for the consequences of their own breach of trust.  Therefore, it is common to include clauses limiting trustees’ liability and indemnifying them out of the trust fund for any losses that they suffer as a result of their trusteeship.  Without such provisions, few trustees, particularly professional trustees, would be willing to undertake the role.


Generally speaking, trustees have never been able to be indemnified for failing to administer the trust honestly and in good faith for the benefit of the beneficiaries.  They can, however, be indemnified for breaches of trust arising from their own negligence, wilful misconduct and, at least until the Act comes into force, gross negligence. However, the Act makes it clear that trust deeds must not limit trustees’ liability or provide an indemnity in relation to the trustees’ own dishonesty, wilful misconduct or gross negligence.  Any terms of a trust deed that purport to limit or exclude such liability will be invalid under the Act. 


The role of a trustee has always come with significant responsibilities and potential personal liability for trustees if their duties are not properly understood and discharged.  Those who are currently trustees of trusts or proposing to take on the role of a trustee, whether for a trust that they are themselves establishing or otherwise, should seek advice from us to ensure that the trust deed is drafted in such a manner that provides the appropriate degree of protection for the trustee in the circumstances of the particular trust.  Secondly, it is important that trustees be aware of their responsibilities, potential liability and how best to manage them.