Trusts Act 2019: Duties of trustees
There are two types of duties in the Trusts Act - mandatory duties (which cannot be modified or excluded) and default duties (which can be modified or excluded).
These are the mandatory duties:
know the terms of the trust
act in accordance with the terms of the trust
act honestly and in good faith
act for the benefit of the beneficiaries
exercise the trustee’s powers for a proper purpose
These are the default duties:
exercise the care and skill that is reasonable in the circumstances taking into account any special knowledge or experience of the trustee
when investing trust property, exercise the care and skill that a prudent person of business would exercise in managing the affairs of others taking into account any special knowledge or experience of the trustee
not exercise a power of a trustee for the trustee’s own benefit
consider actively and regularly whether the trustee should be exercising one or more of the trustee’s powers
not bind or commit trustees to a future exercise of a discretion
avoid a conflict between the interests of the trustee and the interests of the beneficiaries
act impartially in relation to the beneficiaries
not make a profit from the trusteeship
not take any reward for acting as a trustee
act unanimously with any other trustees
The default duties are able to be modified or excluded by the terms of the trust[1]. In the case of an existing trust, a variation to the terms of the trust may be necessary to modify or exclude the default duties – that may not be possible if the terms of the trust do not contain a power to vary or the scope of the power to vary is limited (and the modification and exclusion of the default duties is outside that scope).
We have published A trustee’s guide to the Trusts Act 2019 (Guide) – the above is an extract from the Guide. If you would like a full copy of the Guide, please get in contact with us.
Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.
[1] The default duty in section 32 (the duty to consider exercise of power) can be modified only to the extent that is consistent with section 51(4) (which requires a trustee to consider at reasonable intervals whether the trustee should be making the basic trust information available).