Duties of a Trustee

Duties of a trustee are as follows:

Being familiar with the terms of the will/deed
Obtaining control of the assets
Adhering to and carrying out the terms of the trust
Acting impartially between the beneficiaries
Keeping and rendering proper accounts and to give full information when required
Not delegating the trustee/s' duties or powers
Discretion
Advice
Paying and transferring the trust property and the income to the correct beneficiaries
Duty to act gratuitously
Duty not to mix assets
Duty to act unanimously
Investing the trust funds

 

Being familiar with the terms of the will/deed

A duty exists for trustees to understand and to be fully aware of the terms of the trust. This is essential in order to carry out the purpose of the trust.

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Obtaining control of the assets

The trustee must ensure that all the assets belonging to the trust are collected and fall within the trustee’s control. The trustee must also become familiar with the type and condition of the assets involved.

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Adhering to and carrying out the terms of the trust

Trustees have the duty to comply with and to carry out the terms set out in the trust deed unless the courts or legislation provide otherwise.

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Acting impartially between the beneficiaries

Trustees have a duty to all beneficiaries to exercise their powers as trustee in an impartial manner. That is, the interests of one beneficiary cannot take precedence over another.

A trustee should not feel under pressure to benefit one beneficiary ahead of another and must act in the best interests of all beneficiaries, present and future.

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Keeping and rendering proper accounts and to give full information when required

Trustees are required to keep proper accounts, which must be kept ready for disclosure when requested by beneficiaries or their authorised agents, and to provide beneficiaries with information about the financial state of the trust.

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Not delegating the trustee/s' duties or powers

Trustees have limitations placed on their ability to delegate the powers conferred on them.

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Discretion

Trustees are not able to fetter their discretion (i.e. they cannot enter into arrangements which narrow/remove discretion).

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Advice

A trustee can obtain advice from a suitable professional, however, that advice should not be acted upon without due consideration.

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Paying and transferring the trust property and the income to the correct beneficiaries

The trustee is obliged to pay the income and capital of the trust to beneficiaries in accordance with the terms of the trust document.

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Duty to act gratuitously

Trustees have a duty to act in and for the interests of the beneficiaries of the trust without pay. Exceptions to this duty include circumstances where provision exists in the trust deed, where an agreement exists or can be reached between the trustees and beneficiaries, or where the court approves.

Professional Trustee Companies are exempt from this duty and are entitled to be remunerated under Part IV of the Trustee Company Act 1984 (Vic).

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Duty not to mix assets

Trustees have a duty to keep their personal assets and the assets of any trusts under their care separate and distinguishable, unless the trust deed provides otherwise or the courts so orders under s. 63 of the Trustee Act 1958 (Vic).

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Duty to act unanimously

Trustees are required to make decisions regarding the administration of the trust unanimously. Their liability is both joint and several.

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Investing the trust funds

Trustees have a general duty to invest any funds. All trust investments require annual reviews. This duty to invest must be exercised with the care, diligence and skill of an ordinary ‘prudent person’ or, where a professional trustee is appointed, a professional ‘prudent person’. 

Trustees must have regard to the terms of the deed or will, together with the provisions of Section 8 of the Trustee Act 1958 (Vic) which include:

  • The purpose of the trust and the needs and circumstances of the beneficiaries.
  • The desirability of diversifying trust investments.
  • The nature of and risk associated with existing trust investments and other trust property.
  • The need to maintain the real value of the capital or income of the trust.
  • The risk of capital or income loss or depreciation.
  • The potential for capital appreciation.
  • The likely income return and the timing of income return.
  • The length of the term of the proposed investment.
  • The probable duration of the trust.
  • The liquidity and marketability of the proposed investment during and on the determination of the term of the proposed investment.
  • The aggregate value of the trust estate.
  • The effect of the proposed investment in relation to the tax liability of the trust.
  • The likelihood of inflation affecting the value of the proposed investment or other trust property.
  • The costs, including commissions, fees, charges and duties payable, of making the proposed investment.
  • The results of a review of existing trust investments.
  • Trustees are not permitted to take on the same degree of risk with trust investments as they might with their own, and speculative investments are not permitted.

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Contact us

For more information about trusts or to make a no-obligation appointment to discuss your estate planning requirements, contact one of our Client Relationship Managers on 03 8623 5000, 1300 555 511 or click here.

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