Trustees play a pivotal role in the success and governance of organisations, particularly in the charitable and non-profit sectors. They are entrusted with the responsibility of ensuring their resources are managed effectively, goals are achieved, and operations remain ethical and compliant with legal requirements.
The role also carries significant legal responsibilities. As solicitors who regularly advise trustees, we recognise the importance of understanding and fulfilling these obligations to ensure compliance with the law and to uphold the integrity of the organisation. This guide explores the key legal obligations of trustees and how to remain compliant.
What is a trustee?
A trustee is an individual or organisation appointed to manage and oversee property or assets held within a trust, ensuring these are administered for the benefit of the trust’s beneficiaries.
Trusts can be established for a wide range of purposes, such as managing assets in bankruptcy proceedings, structuring certain types of retirement plans, or safeguarding resources for minors or individuals who lack capacity. Additionally, trusts are often created to hold assets where income and capital are distributed to beneficiaries over a set period of time.
Trustees are bound by a fiduciary duty, which requires them to act solely in the best interests of the beneficiaries. This obligation encompasses prudent management of trust assets, adherence to legal requirements, and ensuring decisions align with the terms and objectives of the trust.
Legal Obligations for Trustees to Consider
Complying with common law duty of care
Trustees must exercise reasonable care, skill, and diligence when managing the organisation’s affairs. This involves staying informed about its operations, seeking professional advice when necessary, and making decisions with due consideration of their impact.
Decision making
Trustees make all the decisions regarding the trust, including acquisition, application and disposal of the assets.
The Trustee Act 2000 extended the power of investment trustees whilst protecting the interests of the beneficiaries against abuse of these powers. When making decisions, unless otherwise provided for in the trust document, trustees’ decisions must be unanimous.
Managing assets
Trustees are responsible for managing the assets in a trust – the money, financial instruments, property or other asset types (for example, cryptocurrency).
The 2000 Act granted trustees the authority to acquire freehold or leasehold land within the UK. Additionally, in the case of discretionary trusts, trustees are afforded greater flexibility in making decisions, provided those decisions are made in the best interests of the beneficiaries.
Trustees must exercise reasonable care, skill, and diligence when managing the organisation’s affairs. This involves staying informed about its operations, seeking professional advice when necessary, and making decisions with due consideration of their impact.
Tax & Accounts
The trustees are responsible for ensuring that any taxes owed by the trust are accounted for and reported to HMRC. These taxes may include Inheritance Tax, Capital Gains Tax, and Income Tax.
To fulfil this duty, trustees must prepare annual accounts and submit tax returns to HMRC to declare any tax liabilities. Trustees may choose to engage accountants to prepare the accounts and provide expert advice on taxation matters, ensuring compliance and accuracy in all financial reporting.
Ensuring Legal Compliance
Understand your obligations
Take the time to familiarise yourself with the organisation’s governing document, as well as relevant laws and regulations. Training sessions or legal briefings can help trustees stay informed.
Keep accurate records
Maintain detailed minutes of trustee meetings, financial transactions, and other key decisions. Clear documentation demonstrates accountability and can protect trustees in the event of a dispute.
Seek professional advice
Trustees are not expected to be experts in every area of governance. Engaging solicitors, accountants, or other professionals can provide invaluable support when navigating complex legal or financial issues.
Regularly review policies and procedures
Ensure organisational policies – such as those related to safeguarding, risk management, and financial controls – are up to date and adhered to. Regular audits and reviews are essential.
Howell Jones Solicitors Can Help
Howell Jones understands the complexities and responsibilities that come with being a trustee. Our experienced team is here to provide the guidance and support you need to navigate your role with confidence. Whether you are seeking advice on legal compliance, governance, or resolving challenges, we offer tailored solutions to suit your organisation’s unique needs.
Let us help you make informed decisions and achieve long-term success. Contact us today to learn more.
