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Trustee liability, Trustees

What is it to be a trustee?

I enjoyed a spirited discussion tonight regarding the role of trustee and whether it is sufficient for one of a number of trustees to manage the trust and make all decisions regarding distributions provided that reports were made to the other trustee.

Given the duties of management and accouting that trustees have and the obligations to consider the beneficiaries the scenario noted above is not a “correct” demonstration of trustee obligations.  However, it is clear that many trusts operate in this fashion.

So what’s the harm?  Answering this reminds me of the old chestnut, “if a tree falls and nobody hears it …”.

If a trustee does not act in accordance with the duties owed, provided the trust is managed by someone, and trust income still gets distributed, does it really matter?  While it is easy to take a big picture view and essentially approach this on a no harm, no foul basis, the devil really is in the detail.  The real question perhaps should be, if you are going to settle a trust, but refuse to allow or require the trustees to operate and manage the trust, then why bother?

These practices reduce trusts to an expensive subterfuge that will foil only the feeblest of enquiries or attacks. 

So what is it to be a trustee?  Maybe the answer is considered by reference first to what it is not.  A trustee is not a yes man (or woman).  A trustee is a co-owner of trust property who should manage that property as if it were the trustee’s own.  This means a positive duty to invest or manage prudently.  And why prudently – because although the property is invested or managed as if it were the trustee’s own, it is not.  The trustee is the legal owner, but not the beneficial owner.  The trustee is managing the property for the beneficiaries and is answerable to them for the same.  So given that responsibility, why would you let someone else take on the trustee role leaving you to face the beneficiaies when the going gets tough.

I think that the hardest part of being a trustee, is often the being the trustee bit.  Appointment as a trustee is not an honour, it is not a favour for a friend, it is a grown up job with grown up responsibilities.  If you can’t or won’t stand up to your co-trustee(s) and act together as trustees, you really need to re-visit the point of the appointment and whether you are trustee material.  Not everyone is, and there is no shame in that.  The shame (and the risk) is taking a role as some form of trustee cipher.

 

Discussion

One thought on “What is it to be a trustee?

  1. Great post Vicki!

    Posted by Jenny Watson | April 12, 2013, 10:45 am

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