Trustee Indemnity Clause UK: Protecting Trustees from Personal Liability in a Will
Updated 31 May 2026 · 8 min read · Trusts & Estate Planning
Trustees can be personally liable for losses to trust assets — even inadvertent ones. A trustee indemnity clause (or trustee exoneration clause) in a will narrows that liability to cases of actual fraud or wilful default, providing essential protection for family members appointed as trustees of an ongoing will trust.
Trustee Liability Without an Indemnity Clause
Under the Trustee Act 2000 s.1, a trustee must exercise such care and skill as is reasonable in the circumstances — taking into account any special knowledge or experience the trustee has or holds themselves out as having. A professional trustee (a solicitor, accountant, or trust corporation) is held to the standard of a professional in that field. A lay trustee (a family member) is held to the standard of a person with ordinary prudence.
If a trustee breaches this duty — for example, by making an imprudent investment, failing to diversify, or delegating improperly — and the trust suffers a loss, the trustee can be sued by the beneficiaries and required to make good the loss from their own pocket. This is personal liability: the trustee’s own assets are at risk.
For family members appointed as trustees of a long-running will trust (a discretionary trust for children, a life interest trust for a surviving spouse), this potential liability can be a significant deterrent — and a real financial risk if markets fall or an investment fails.
What a Trustee Indemnity Clause Does
A trustee indemnity clause raises the threshold at which the trustee can be held personally liable. A typical clause provides that trustees are not liable for any loss to the trust fund unless the loss was caused by their own actual fraud, wilful default, or (in some drafts) gross negligence. Ordinary negligence — an honest mistake, a misjudgement, a poor decision made in good faith — is excluded from liability.
The leading case is Armitage v Nurse [1998] Ch 241 (CA). Millett LJ confirmed that a clause reducing the trustee’s liability to actual fraud is valid and enforceable — it does not offend public policy. But the clause cannot exclude liability for fraud itself: a trustee who is dishonest cannot hide behind any exemption clause.
The effect in practice: beneficiaries who suffer a loss through honest trustee mistakes cannot recover from the trustees personally. Only deliberate dishonesty or reckless disregard of trust obligations crosses the threshold the clause permits.
What a Trustee Indemnity Clause Cannot Excuse
- Fraud and dishonesty — any clause purporting to exempt a trustee from fraud is void as a matter of public policy (Armitage v Nurse).
- Wilful default — deliberate breach of trust is not protected by standard indemnity wording.
- Statutory liability — trustees cannot contractually exempt themselves from statutory duties: TRS registration, HMRC reporting obligations, and certain Trustee Act duties that cannot be modified by the trust instrument.
- Conflict of interest transactions — where a trustee purchases trust property in breach of the self-dealing rule, the transaction is voidable regardless of any indemnity clause.
Section 61 Trustee Act 1925: The Court’s Safety Net
Where no trustee indemnity clause exists (or the clause does not cover the breach), a trustee who has committed an honest but technically wrongful act can apply to the court for relief under s.61 Trustee Act 1925. The court may fully or partially excuse the trustee if satisfied that:
- The trustee acted honestly — no deliberate wrongdoing.
- The trustee acted reasonably — their conduct was defensible given their knowledge, experience, and the circumstances.
- It would be fair to excuse the trustee — balancing the hardship to the trustee against the loss suffered by the beneficiaries.
S.61 is a judicial discretion exercised after the breach. It is uncertain, expensive to obtain, and provides no guarantee. A trustee indemnity clause in the will is far preferable: it prevents the breach claim from arising in the first place rather than requiring the trustee to seek relief after litigation has begun.
Trustee Indemnity Clause vs Charging Clause
| Feature | Trustee Indemnity Clause | Charging Clause |
|---|---|---|
| Purpose | Limits personal liability for losses | Authorises charging professional fees |
| Benefit to trustee | Protection from breach of trust claims | Right to remuneration |
| Needed for lay trustees | Yes — strongly advisable for long-running trusts | No — lay trustees cannot charge |
| Needed for professional trustees | Yes — protects professional from liability | Yes — without it they cannot charge fees |
When Is a Trustee Indemnity Clause Most Important?
- Long-running will trusts — discretionary trusts, life interest trusts, trusts for minor children, or trusts for disabled beneficiaries that may last many years.
- Trusts holding complex or volatile assets — property, business interests, unlisted shares, or overseas investments where market-driven losses could otherwise attract a claim.
- Lay trustees — family members without financial expertise who may not be able to defend their decision-making to the objective standard the law would otherwise apply.
- Mixed professional and lay trustee appointments — where a solicitor and a family member act together, both benefit from an indemnity clause covering their respective liabilities.
FAQs
What is a trustee indemnity clause?
A trustee indemnity clause (also called a trustee exoneration clause or trustee exemption clause) is a provision in a will or trust deed that limits or removes a trustee's personal liability for breaches of trust or losses to the trust fund — typically by providing that the trustee is not liable unless the loss was caused by their own 'actual fraud', 'wilful default', or 'gross negligence'. Without such a clause, trustees are held to the full objective standard of skill and care under the Trustee Act 2000 s.1, and can be personally liable for any breach that causes loss, regardless of their intent. The clause narrows the circumstances in which a beneficiary can sue the trustee by raising the fault threshold required to establish liability. Trustee indemnity clauses are common in professionally drafted wills and trust deeds, particularly where lay trustees (family members without financial expertise) are appointed alongside or instead of professional trustees.
What is the difference between a trustee indemnity clause and a charging clause?
A charging clause and a trustee indemnity clause serve different purposes: (1) A charging clause authorises a professional trustee or executor to charge fees for their time and services. Without it, equity's no-profit rule prevents a professional fiduciary from charging for professional time (only out-of-pocket expenses can be recovered). A charging clause confers an entitlement to remuneration. (2) A trustee indemnity clause limits liability for loss. It does not confer any right to payment — it protects the trustee from being held personally liable for losses that would otherwise give rise to a breach of trust claim. A well-drafted will for professional trustees typically includes both: a charging clause (so they can be paid) and an indemnity clause (so they are protected from personal liability for non-fraudulent errors). A will appointing a lay executor-trustee (a family member) typically does not need a charging clause but may benefit from an indemnity clause to reflect the practical reality that a non-professional should not be expected to meet the same objective standard as a professional.
What breaches of trust can a trustee indemnity clause not excuse?
Even the most widely drafted trustee indemnity clause cannot excuse: (1) Fraud — a trustee who deliberately or dishonestly misappropriates trust assets cannot shelter behind an indemnity clause. Fraud is not capable of contractual exclusion in equity, and s.57 Trustee Act 1925 does not assist. (2) Wilful default — a trustee who deliberately acts in breach of trust (as opposed to making a negligent error) cannot rely on the clause. (3) Where the Law Commission and case law have held the clause void — the courts have the power to strike down clauses that purport to exclude liability for dishonesty under Armitage v Nurse [1998] Ch 241 (CA). In Armitage v Nurse, Millett LJ held that an indemnity clause reducing the trustee's liability to 'actual fraud' was valid and did not offend public policy — but the clause could not go further and attempt to exclude even fraud. (4) Statutory liability — trustees cannot exclude liability for certain statutory duties, including their duty to register the trust under the Trust Registration Service rules.
What is section 61 of the Trustee Act 1925 and how does it differ from an indemnity clause?
Section 61 of the Trustee Act 1925 gives the court a discretionary power to relieve a trustee from personal liability for a breach of trust if the trustee 'acted honestly and reasonably and ought fairly to be excused.' Unlike a trustee indemnity clause (which is a contractual term in the trust document itself), s.61 is a judicial remedy that operates after a breach has occurred. The beneficiaries must first establish the breach and loss; the trustee then applies to the court for relief. The court has a wide discretion and considers whether the trustee acted honestly, whether they acted reasonably given their knowledge and experience, and whether it would be fair to excuse them. S.61 provides a safety net for trustees who did not have the foresight to include an indemnity clause, or where the clause does not cover the specific breach. A trustee indemnity clause in the will is preferable: it prevents the breach claim from arising in the first place (to the extent the clause applies) and avoids the cost and uncertainty of court proceedings.
Should a will always include a trustee indemnity clause?
Not always — it depends on the nature of the trust and the trustees appointed. For a will that creates a straightforward executorship with no ongoing trust (all assets distributed within the executor's year and no surviving minor beneficiaries), a trustee indemnity clause is less important because the executor's role ends quickly. For a will that creates an ongoing trust — for example, a discretionary will trust, a life interest trust for a surviving spouse, a trust for minor children, or a disabled beneficiary trust — a trustee indemnity clause is strongly advisable. It is particularly important where: (1) lay trustees with no professional experience are appointed alongside a professional trustee; (2) the trust fund includes illiquid or volatile assets (land, business interests, shares) where market-driven losses might otherwise be attributed to trustee negligence; (3) the trust is expected to run for many years. The clause should be carefully drafted to set the liability threshold at the right level — typically excluding liability for anything short of actual fraud or wilful default, consistent with Armitage v Nurse.
Can trustees be protected by insurance instead of an indemnity clause?
Trustee liability insurance (also called trustee indemnity insurance) is a separate protection mechanism that provides third-party insurance cover for trustee liability claims, legal costs, and awards. It operates independently from a contractual indemnity clause in the will: the trustee carries out their duties; if a claim arises, the insurer indemnifies the trustee (up to the policy limit) rather than the trustee paying personally. Trustee liability insurance is commonly taken out by charities, pension trustees, and professional trust companies. It is less common in private family trusts but is available and can be arranged by the trustees without prior authority from the will — the power to insure trust property against loss and to pay premiums from the trust fund is now implied by s.19 Trustee Act 2000. A well-drafted will trust can expressly authorise the trustees to take out trustee liability insurance and pay the premiums from the trust fund. Insurance and a contractual indemnity clause are complementary, not alternatives: the clause narrows the circumstances of liability; the insurance covers claims that do arise.
Protect the People You Trust as Trustees
A well-drafted will trust should include both a trustee indemnity clause and appropriate trustee powers — protecting your family trustees from personal liability for honest mistakes. WillSafe’s DIY will kit for England and Wales helps you put a legally valid will in place, and we recommend pairing it with specialist advice where long-running trusts are involved.
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