Holding the office of trustee imposes various obligations, some of which are common to all trustees regardless of the type of trust over which they have been appointed. A person who has "the general control and management of the administration of a charity" will, under the Charities Act 1993, be treated as a trustee of that charity. A director of a charitable company will also be deemed to be a charity trustee.

Primary Duties
• to act in the best interests of the beneficiaries
• not to delegate responsibilities to others unless permitted by the trust instrument
• not to profit from being a trustee
• to use all the care in relation to trust business that an ordinary prudent man of business would use in relation to his own affairs

Personal Liabilities

1) Liability for breach of trust:
A trustee acting outside the powers given to him by the rules in the trust instrument commits a breach of trust, which may be fundamental (eg payments of trust funds to someone who is not a beneficiary) or technical (eg investing in an unauthorised investment). A trustee may even be liable for a breach of trust committed before he became a trustee if there were suspicious circumstances which that trustee failed to investigate, or for a breach occurring after he retired if that retirement enabled the breach to take place.

If the breach causes a loss to the trust fund, the trustee must restore the funds of the charity to the level they would have been in had the breach not taken place, as well as accounting for any incidental personal profit made by him.

2) Liability to third parties
Unless the charity in question is a company, a trustee may incur personal liabilities to third parties on a charity's behalf, eg to a bank for a loan or to an injured party for an employee's negligence. If acting within his appropriate powers, the liability will be met out of trust funds as far as possible, though he may be liable for any excess. If acting beyond his powers, the liability will be his alone.

3) Practical Responsibilities
Bank accounts: to be operated by not less than two signatories and obtaining maximum interest available

Accounting requirements: depending on the level of annual trust income/expenditure, anything from simply keeping proper, publicly available, books of account to fully audited annual report and accounts may be required. Always be sure of the specific requirements of your trust.

4) Delegation and Decision-Making
A trustee usually should act personally and not delegate his decisions, though the document setting out the trust rules may permit some delegation. If a decision is wrongly delegated, the trustee may find himself personally liable for any resulting loss.

In broad terms, a trustee may appoint agents in the same way as a prudent man of business would in relation to his own affairs, and administrative decisions may be delegated to appropriate people, such as staff or solicitors. In case of doubt, ask the Charity Commission for advice/permission.

Decisions may be taken by majority in charitable trusts, which is not the case with other trusts. However, where decisions are reached by a majority, rather than unanimously, they should only be made reluctantly and only after all the trustees have had the chance to express their views.

5) Managing Trust Money

Income
In general, except for charitable companies (or trusts established by companies), income should be applied for the charity's purposes and not left to accumulate (unless the charity has a specific purpose requiring this, and then not beyond 21 years). The particular rules in the trust instrument should be followed. If for any reason this is not possible or desirable, the Charity Commission will advise.

Proper expenses (eg legal or agents' fees, trustees' personal out of pocket expenses) may be charged to the trust. Only in certain special circumstances where the trust instrument allows it, will payment for trustees' services to the charity be permitted.

Capital
The rules set out in the trust instrument determine whether capital may be spent as if it were income. Capital may not be so spent if it is "permanent endowment", and an application will be necessary to the Charity Commission. All expenditure must be made within the objects of the charity.

The Trustee Act 2000 provides that trustees must follow Standard Investment Criteria (SIC) when exercising any power of investment (whether arising under the Act or otherwise). Furthermore trustees must from time to time review the investments of the trust and consider whether in the light of the SIC the investments should be varied.

The SIC are:-
a. the suitability to the trust of investments of the same kind as any particular investment proposed to be made or retained and of that particular investment as an investment of that kind; and
b. the need for diversification of investments of the trust, insofar as is appropriate to the circumstances of the trust

On a sale of land, a trustee should be satisfied that the terms are the best that can reasonably be obtained, and may need Charity Commission consent, unless the sale is on the open market to an unconnected person, and the trustee has obtained a written report from a qualified surveyor. On a purchase, the trustee has a duty to pay no more than the proper price.

The Strategy Unit Report
In September 2002 the Cabinet Office Strategy Unit published a report which made proposals, the intention of which was to encourage people to act as trustees of charities, whilst, at the same time, aiming to increase public confidence in the sector. In July 2003 the Government published its response to the report, indicating which recommendations it intends to support and to what exent.

The suggested measures included

More details will be found in the Charles Russell booklets, available from our offices free of charge, on Charity Trustees' Responsibilities and Directors' Responsibilities.

Please click here if you would like a copy of either booklet.