It has been established through common law that the basic duties and responsibilities of a trustee when administering the assets of a trust are subject to various fiduciary obligations:

1.    The duty of care. Trustees owe a duty to the beneficiaries to act in the same manner a reasonable and prudent businessperson would in conducting their own affairs.

2.    The duty to act personally. This duty means that a trustee cannot delegate decision-making power. While they may seek advice from other individuals and professionals, the ultimate decision-making responsibility rests with the trustee.

3.    The duty to avoid conflicts of interest and act solely for the benefit of the beneficiaries. This duty outlines that a trustee must act only in the best interests of the beneficiaries of the trust and must act in a way that creates no conflict between the trustee’s own interests and those of the beneficiaries. This duty can often present challenges as the trustee is sometimes a close family member to a beneficiary of the trust. In that case, the trustee should always consider how an independent trustee with no personal connection to any of the beneficiaries would act in their role, and then be guided by that. One way to avoid this issue is by including terms in the trust document that expressly state that the trustee is not required to treat the beneficiaries equally.

4.    A trustee may not personally profit from the administration of the trust. This duty means that a trustee cannot receive any personal financial gain, directly or indirectly, as a result of the decisions they make in exercising their role in administering the trust.

In some cases, legislation imposes higher standards and obligations on trustees than those outlined above. One example of this is the Trustee Act, which contains a “prudent investor” rule to govern the manner in which a trustee can invest property when administering a trust. Additionally, the trust agreement in question may also impose higher standards and obligations on the chosen trustee.

Conversely, while the standards and obligations of a trustee can be diminished by specific provisions in the trust agreement, they cannot be removed entirely because the fact that the trustee is a fiduciary is a paramount duty.

Thanks for reading and have a great day!

Ian & Geoffrey