Trustee Duties UK (2026): Complete Checklist — Trustee Act 2000, Duty of Care, Investment, Conflicts and Reporting

The Trustee Act 2000 introduced a statutory duty of care that applies across a wide range of trustee functions: (1) THE STATUTORY DUTY OF CARE (TA 2000 s.1): a trustee must exercise such care and skill as is reasonable in the circumstances, having regard in particular: (a) to any special knowledge or experience that the trustee has or holds themselves out as having; and (b) if the trustee acts in the course of a business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession. (2) TWO LEVELS OF THE DUTY: (a) PROFESSIONAL TRUSTEES (solicitors; accountants; trust corporations; professional trust companies): held to the objective standard of a reasonably competent professional in that field. A solicitor-trustee is expected to have the skill and knowledge of a competent solicitor; (b) LAY TRUSTEES (family members; friends; individuals acting without professional expertise): the standard is adjusted — a lay trustee is expected to exercise the care and skill of a prudent person of business managing affairs for a beneficiary they feel morally obliged to protect. The old common law standard was the 'ordinary prudent man of business' (Speight v Gaunt [1883]); (3) SCOPE OF THE STATUTORY DUTY: the TA 2000 s.1 duty applies specifically to: (a) investment functions (Part II); (b) acquisition of land (Part III); (c) appointment and supervision of agents, nominees and custodians (Part IV); (d) the insurance of trust property (s.34); it does NOT automatically apply to every trustee decision — the general law duty of care (acting bona fide in the interests of beneficiaries; acting within the trust instrument) also applies independently; (4) THE DUTY CANNOT BE EXCLUDED IN FULL: the trust instrument may modify or exclude the statutory duty of care (TA 2000 Sch 1 para 7), but cannot exclude liability for fraud or dishonesty. A trustee exclusion clause that purports to exclude liability for 'any act or omission' is effective for negligence but not for conscious wrongdoing.

Investment is one of the most important and heavily regulated areas of trustee activity: (1) THE GENERAL POWER OF INVESTMENT (TA 2000 s.3): unless restricted by the trust instrument, trustees have the power to make any investment that a prudent person making investments for a beneficiary would make. This replaced the old limited list of authorised investments (Trustee Investments Act 1961) with a wide general power. Trustees can invest in equities, bonds, property, and other assets; (2) THE STANDARD INVESTMENT CRITERIA (TA 2000 s.4): when exercising investment powers, trustees must have regard to the STANDARD INVESTMENT CRITERIA: (a) the suitability to the trust of the investments of the same kind proposed and the particular investments proposed; (b) the need for diversification of the trust's investments, insofar as is appropriate to the circumstances of the trust; (3) THE DUTY TO REVIEW (TA 2000 s.4(2)): trustees must from time to time review the investments of the trust and consider whether, having regard to the standard investment criteria, they should be varied. Regular review — at least annually — is best practice; (4) THE DUTY TO TAKE ADVICE (TA 2000 s.5): before exercising any power of investment (other than in relation to cash deposits), trustees must obtain and consider proper advice about the way in which the power should be exercised, unless they reasonably conclude that it is unnecessary to do so. 'Proper advice' means advice given by a person who is reasonably believed by the trustees to be qualified to give such advice by their ability and practical experience of financial and other matters relating to the proposed investment; (5) DIVERSIFICATION: the duty to diversify is a fundamental obligation. A portfolio invested entirely in one asset class, one sector, or one company is unlikely to meet the standard investment criteria — even if that investment has historically performed well. Trustees should document their reasoning on diversification decisions; (6) SOCIAL AND ETHICAL INVESTMENT: trustees may take into account ethical and ESG considerations provided they do not significantly harm beneficiaries' financial interests (Cowan v Scargill [1985]; updated guidance from the Law Commission in 2014). The trust instrument may expressly permit or require ethical investment; (7) PERSONAL REPRESENTATIVES ACTING AS TRUSTEES: executors who retain assets in the estate pending administration are acting as trustees of the unadministered estate and must invest prudently.

Trustees have important administrative and reporting obligations: (1) DUTY TO KEEP ACCOUNTS: trustees must keep clear and accurate accounts of the trust's assets, income, and expenditure. There is no statutory obligation to audit accounts (unless required by the trust instrument or the size of the trust) but accounts must be available for inspection by the beneficiaries on request. Best practice: annual accounts; record of all receipts and payments; record of all investment decisions and the reasons for them; (2) DUTY TO PROVIDE INFORMATION TO BENEFICIARIES: the duty to account and to provide information is one of the most fundamental duties of a trustee. The leading case is Re Londonderry's Settlement [1965] Ch 918, which established: (a) beneficiaries are entitled to information about the trust fund and its administration; (b) trustees are NOT obliged to give reasons for their discretionary decisions (e.g. why they did not distribute to a particular beneficiary); (c) communications between trustees and their solicitors — but NOT the deliberative processes of the trustee — may be protected from disclosure; (d) the Charity Commission and courts have since moved towards greater disclosure — beneficiaries can generally obtain: trust accounts; the trust deed; lists of trust assets; details of transactions. Non-charitable discretionary trust beneficiaries may seek disclosure via the court; (3) HMRC INCOME TAX RETURNS (SA900): trustees of a UK trust that has income or gains must register for self-assessment and file an annual SA900 trust return. Trustees are personally liable for the trust's tax; (4) TRUST REGISTRATION SERVICE (TRS): under HMRC's Trust Registration Service (enacted to comply with the EU 5th Anti-Money Laundering Directive, retained post-Brexit): (a) TAXABLE TRUSTS: all UK express trusts with a UK tax liability must register on the TRS and update annually; (b) ALL UK EXPRESS TRUSTS: from 1 September 2022, even non-taxable UK express trusts must register (with limited exceptions: charitable trusts; bare trusts under 2 years; statutory trusts on intestacy; pilot trusts under £100; trusts created by court order; trusts of jointly owned property held on statutory trust); (c) OVERSEAS TRUSTS: an overseas trust must register if it acquires UK land or has a UK tax liability; (d) PENALTIES for failure to register: £100 per year up to £2,000 for deliberate non-registration; (5) ANNUAL REVIEW AND LETTER OF WISHES UPDATE: where a settlor has provided a letter of wishes, trustees should review it annually and confirm it still reflects the settlor's (or the estate's) intentions.

Trustees are held to strict fiduciary standards in relation to conflicts of interest and personal profits: (1) THE FUNDAMENTAL DUTY — ACT IN BENEFICIARIES' BEST INTERESTS: a trustee must act in the best interests of the beneficiaries of the trust — not in their own interests or the interests of third parties. Every decision made as trustee must be assessed from the perspective of: what would a reasonable trustee, acting for the benefit of the beneficiaries, do?; (2) THE NO-CONFLICT RULE: a trustee must not place themselves in a position where their personal interests conflict with their duties as trustee. This means: (a) a trustee cannot sell their own property to the trust (self-dealing rule) — unless expressly authorised by the trust instrument or the beneficiaries; (b) a trustee cannot purchase trust property for themselves (fair-dealing rule) — even at fair market value, without court approval or beneficiary consent; (c) a trustee cannot act as both buyer and seller in a transaction involving trust assets; (3) THE NO-PROFIT RULE: a trustee must not make a personal profit from their position as trustee unless expressly authorised. The classic case is Keech v Sandford [1726]: a trustee who held a market lease on trust for an infant renewed it for his own benefit when the landlord refused to renew for the infant — held: the trustee held the renewed lease on trust for the infant; all profit must be handed over. The no-profit rule extends to: (a) taking a benefit from a third party because of the trustee's position; (b) using trust information to make a personal profit; (c) usurping a business opportunity that the trust could have taken; (4) TRUSTEE CHARGING CLAUSES: by default, a lay trustee cannot charge for their services unless the trust instrument includes a charging clause. TA 2000 s.29 provides a statutory right to charge for professional trustees (those who act in a professional capacity) — a professional trustee is entitled to reasonable remuneration out of the trust fund without a specific charging clause. A lay trustee cannot take remuneration without a charging clause; (5) CONNECTED TRANSACTIONS — DISCLOSURE: where a trustee has a connected person (spouse; business partner; company they control) who benefits from a trust transaction, full disclosure to all beneficiaries is required — and, ideally, approval obtained. In contentious estates, connected-party transactions are one of the most common grounds for beneficiary challenge.

A breach of trust can give rise to personal liability for the trustee — meaning they may have to make good losses from their own resources: (1) WHAT CONSTITUTES A BREACH OF TRUST: any act or omission by a trustee that is: (a) outside the powers given by the trust instrument or by statute; (b) in breach of a fiduciary duty (no-conflict; no-profit); (c) a failure to exercise the required standard of care (negligent investment; failure to review; failure to diversify); (d) failure to distribute to a beneficiary who is entitled; (2) PERSONAL LIABILITY FOR LOSS: where a breach causes loss to the trust fund, the trustee is personally liable to restore the trust fund to the position it would have been in but for the breach (Target Holdings v Redfern [1996]). This is an equitable obligation — the trustee must restore the fund in specie (return the specific asset lost) or pay the equivalent in money; (3) ACCOUNT OF PROFITS: where a trustee has made a personal profit from a breach of the no-profit rule (e.g. taken a secret commission), they must account for the entire profit made — not just the loss to the trust. The remedy is restitutionary — the trust is entitled to the profit regardless of whether it suffered a loss; (4) DEFENCES AND RELIEF: (a) Consent of beneficiaries: where all adult beneficiaries with full capacity consent to the breach — before or after — the trustee is protected (Saunders v Vautier principle); (b) Court relief (Trustee Act 1925 s.61): a court can excuse a trustee from liability where they acted honestly and reasonably and it would be fair to excuse them (common for lay trustees who made innocent mistakes); (c) Limitation: claims for breach of trust are generally barred after 6 years (Limitation Act 1980 s.21(3)) unless the claim involves fraud or recovery of trust property from the trustee; (5) LIABILITY BETWEEN CO-TRUSTEES: trustees are jointly and severally liable for breach of trust — any one trustee can be sued for the entire loss. A trustee who pays more than their share is entitled to a contribution from co-trustees (Civil Liability (Contribution) Act 1978). A trustee who is a minor at the time of the breach may escape liability until they reach 18; (6) TRUSTEE INDEMNITY INSURANCE: trustees should consider trustee indemnity insurance, which covers costs of defending a breach of trust claim and (in some policies) the resulting payment orders. This is especially important for professional trustees and family trusts with significant assets.