News and Client Advice
We would strongly urge any trustee to keep FULL records of everything, including gifts etc. Fact is Trustees act in a fiduciary capacity to the Trust property and to beneficiaries. It follows then that Trustees must account to beneficiaries, and can be sued by beneficiaries where trust assets have been wasted, lost, used by trustees etc.
The standards that trustees must observe in the administration and management of a trust arise from the duties that the law imposes on Trustees. The law is contained in the Trustee Act 1956 ("Act") and cases argued under this Act.
The following list includes several of the most important duties:
- The duty of efficient management;
- The duty to keep and render full and proper accounts to the beneficiaries;
- The duty to act personally; and
- The duty of loyalty.
Duty to Keep and Render Accounts
Trustees have the duty to keep and render to the beneficiaries a full and proper record of their administration of the trust assets. Some of the most important aspects of this duty are as follows:
The trustees must keep proper accounting records and prepare financial statements relating to appropriate accounting periods. The trustees' general duties include the duty to provide full information to beneficiaries, as beneficiaries are entitled to inspect "trust documents" unless there is good reason why they should not.
The duty to keep and render accounts is a duty imposed directly on trustees, but trustees do not have to prepare the accounts themselves. Unless trustees have appropriate skills or the trust affairs are very simple, the trustees should use qualified accountants to carry out these tasks. Where trusts are required to file tax returns, trustees must ensure that this is done properly.
In short, it is in trustees own interests to ensure that they keep full records of everything, and keeping good records is the best way they can protect themselves.