Mandatory duties

This article is the third in our series on the new Trusts Act 2019 (click here to access most recent article).

The new Act applies to most existing and new Trusts, and amongst other things, introduces changes to the obligations of Trustees; one of the most notable being the imposition of ‘Mandatory Duties,’ on Trustees.

Mandatory Duties are those which a Trustee must comply with. These duties cannot be modified or excluded by the Trust Deed and provide that a Trustee must:

1. Know the terms of the Trust;
2. Act in accordance with the terms of the Trust;
3. Act honestly and in good faith;
4. Act for the benefit of the beneficiaries, and holding or dealing with trust property for their benefit; and
5. Exercise the Trustee’s powers for a proper purpose

In addition to the above Mandatory Duties, the Act also imposes a set of ‘Default Duties.’ While these are not compulsory and can be modified or excluded by the Trust Deed, it is important to understand that they do apply unless they have been expressly excluded.

The Default Duties provide that the Trustee must:

1. Exercise reasonable skill and care in administering the Trust;
2. Invest prudently, with regard to special knowledge or experience;
3. Not exercise their power for their own benefit, whether directly or indirectly;
4. Regularly and actively consider whether they should be exercising their powers;
5. Not bind or commit Trustees to the future exercise or non-exercise of their powers;
6. Avoid conflicts of interest;
7. Act impartially between beneficiaries;
8. Not make a profit from being a Trustee;
9. Not take any reward for being a Trustee (however this doesn’t prevent reimbursement for legitimate expenses and disbursements); and
10. Act unanimously with the other Trustees.

As a Trustee under the new Act, it is vital that you understand your powers, rights and obligations, and action these where needed.

If you have concerns or wish to ensure that you will meet the new requirements as set out in the Act please ensure that you contact us to discuss further.

Topics to be covered in the next edition:

• Retention of Information
• Appointment and Removal of Trustees.

If you have any questions about the matters raised in these articles, please call to discuss further.

Lifelaw team

Stephen Jeffery, Monica Ryan, Gerard Thwaites, Chris Anderson, Rosemary Aitken, Vanessa Boyd, Sherie Adams, Lisa Penn, Ant Lilley, Julie Hutton