Business Management · Trusts and agency

Trustees: Duties, Powers and Liabilities Explained

Updated 11 October 2026 · Fact-checked

A trustee holds trust property for the beneficiaries and must act in their interest. Duties are things the trustee must do, such as act prudently, avoid conflicts and account. Powers are things the trustee may do, such as invest or delegate. Breach of a duty or misuse of a power makes the trustee personally liable.

Understand Trustees: Duties, Powers and Liabilities

A trust separates legal control from benefit. The trustee controls the property. The beneficiaries are entitled to the benefit. Because the trustee holds this position of trust, the law treats the trustee as a fiduciary.

Start with the difference that students search for most. A duty is compulsory. The trustee must perform it, and failing to do so is a breach. A power is discretionary. The trustee may use it, but only for its proper purpose, within the trust deed and the law, and after considering the beneficiaries' interests. Misusing a power is also a breach.

The core duties are:
- Follow the trust deed and the law. Acting outside the terms is a breach even if it is well meant.
- Act in the beneficiaries' interest, and treat beneficiaries fairly where there are several.
- Avoid conflicts of interest and not make a personal profit from the position without authority.
- Act with prudence and care, as an ordinary careful person would with their own affairs. Professional trustees may be held to a higher standard.
- Keep accounts and give information, and keep trust property separate from personal property.
- Act jointly with co-trustees unless the deed says otherwise.

The main powers are to invest trust money, to delegate tasks to agents or advisers, to pay expenses, and to use any discretions the deed gives. Investment must be suitable, diversified where appropriate, and consistent with the deed and any applicable statute or regulation. Delegation is allowed for suitable tasks, but the trustee must choose the agent with care and keep supervising. The trustee cannot hand over the core decision-making role.

For a pension fund, the trustees run a scheme for members. They rely on the actuary for valuations and advice on funding. The actuary advises, but the trustees remain responsible for their own decisions.

Breach of trust is any failure to carry out a duty or any improper use of a power. The trustee can be made personally liable to restore the loss or hand over any profit. The remedies and beneficiary rights are covered in a related topic. A trustee may be removed by the court, may retire in line with the deed and the law, or may be replaced under the deed's own procedure. Exact statutory provisions differ by type of trust, so quote the principle unless the question gives the provision.

Key rules to remember

Duty versus power: Duty = must do (breach if not done). Power = may do (breach if misused).; Use this one line to answer any 'difference' question.
Standard of care: Trustee must act as a prudent person would with their own affairs.; A professional or paid trustee may be held to a higher standard.
No-profit and no-conflict rule: Trustee must not profit from the office or put personal interest against the beneficiaries.; Applies even if the trust suffers no loss, unless authorised by the deed or the court.
Delegation rule: Delegate suitable tasks only; select with care; supervise; keep responsibility.; Trustees cannot delegate the core decision-making role.
Liability for breach: Personal liability = restore loss caused + account for any profit made.; Liability is generally joint among trustees who took part in or allowed the breach.

How to solve Trustees: Duties, Powers and Liabilities questions

Use this order for any scenario or essay question on trustees.

1Identify who is the trustee, who are the beneficiaries and what the trust deed says.
2Decide whether the question concerns a duty, a power, or both.
3Name the rule that applies, for example prudence, conflict, investment or delegation.
4Apply the rule to the facts. Quote the facts that matter, such as the deed's wording, the amount and the person involved.
5Decide if there is a breach and whether it caused a loss or a profit.
6State the liability: restore the loss, account for profit, and note any defence the facts support, such as consent or authority in the deed.
7Add the remedy or the removal point if the question asks, then give a one-line conclusion.

Quickest way: Duty, power, breach, liability in four lines

When to use it: Use it for MCQs and for short written parts when time is tight.

Label the act as a duty or a power.
Ask: did the trustee follow the deed and act prudently and loyally?
If not, call it a breach and say what harm or profit resulted.
Finish with personal liability and the likely remedy.

Common mistakes in Trustees: Duties, Powers and Liabilities

Treating powers as duties, or the reverse.
Both are listed in the deed and the wording looks similar.
Fix: Ask whether the trustee has a choice. If yes, it is a power. Even then the power must be used properly.
Saying a trustee is not liable because there was no loss.
Students link liability only to loss.
Fix: A breach of the no-profit or no-conflict rule can make the trustee account for the profit even when the trust lost nothing.
Saying delegation removes responsibility.
It seems natural that the adviser carries the risk.
Fix: The trustee must choose with care and supervise. Failing at these steps is the trustee's own breach.
Ignoring the trust deed.
Students rely on general principles alone.
Fix: State that the deed is the first source of authority, and general law fills the gaps.
Claiming the actuary is liable as trustee for scheme decisions.
Pension questions blur the adviser and trustee roles.
Fix: Say the trustees decide and remain responsible. The actuary advises and is accountable for the quality of that advice under professional standards.

Worked examples

Example 1

A trust deed allows trustees to invest in listed shares and bonds. The only trustee puts the whole fund into the shares of one company owned by a friend. The company fails. Discuss the trustee's position.

Show the solution

Facts: the deed gives a power to invest. It is a power, not a duty to buy any particular asset.
Rule: the power must be used prudently, with suitable diversification, and in the beneficiaries' interest.
Application: putting the whole fund in one company ignores diversification. The friend link also suggests a possible conflict of interest.
Breach: failure of prudence, and possibly of loyalty, even though the investment type was permitted.
Liability: the trustee is personally liable to restore the loss caused by the breach.

Answer: The trustee is in breach of the duty of prudence and possibly the no-conflict rule. Permission to invest does not excuse an imprudent use of the power. The trustee must restore the loss personally.

Example 2

Three trustees of a pension fund appoint an investment manager and then stop reviewing its work. The manager makes unauthorised investments and the fund loses ₹40,00,000. Can the trustees say the manager is solely to blame?

Show the solution

Rule: trustees may delegate suitable tasks, but they must select the agent with care and supervise.
Facts: the trustees appointed a manager, which is allowed. They then stopped reviewing, which breaches the supervision duty.
Causation: ongoing review would probably have caught the unauthorised investments earlier.
Liability: the trustees are in breach and are generally liable together to restore the loss of ₹40,00,000.
Add: the manager may also be liable for exceeding its authority, and the trustees may have a claim against the manager.

Answer: No. The trustees remain responsible for failing to supervise. They are liable to restore ₹40,00,000 to the fund, and may seek recovery from the manager.

Exam tips

Start every answer by separating duty from power. Examiners reward the clear distinction.
Use the facts. Name the person, the amount and the deed term instead of writing general theory.
For pension scenarios, state who decides (trustees) and who advises (actuary).
If asked for liability, give both parts: restore the loss and account for any profit.
Do not quote section numbers unless the question gives them. Stating the principle clearly earns the marks.

Practice questions from Trusts and agency

Trustees: Duties, Powers and Liabilities in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Trustees: Duties, Powers and Liabilities: frequently asked questions

What is the difference between a trustee's duties and powers?

A duty is something the trustee must do, such as act prudently and keep accounts. A power is something the trustee may do, such as invest or delegate. Powers must still be used for the proper purpose and with care.

When is a trustee liable for breach of trust?

A trustee is liable when they fail in a duty or misuse a power. The usual result is personal liability to restore the loss and to hand over any profit made. Defences depend on the facts, such as authority in the deed.

Can a trustee delegate their work?

Yes, for suitable tasks such as investment management. The trustee must choose the agent carefully and keep supervising. The trustee cannot give away the core decision-making role.

Can a trustee be removed or retire?

Yes. A trustee can retire as the deed and the law allow, or be replaced under the deed's procedure. A court can also remove a trustee, for example after serious misconduct.