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Project
On
DUTIES OF TRUSTEE

(Submitted as a partial fulfillment of the requirements for B.A.LL.B (HONS) 5 Year Integrated
course )

SESSION:2018-2019

Submitted on :11/09/2019

Supervised by: Submitted To:

RAVI KANT MS. SHATAKSHI JOHRI

Roll No. 111

SEMESTER: V SEC: B

University Five Year Law College

University of Rajasthan,
Jaipur
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DECLARATION

I, RAVI KANT hereby declare that this project titled “DUTIES OF TRUSTEE” is based on
the original research work carried out by me under the guidance and supervision of
MS.SHATAKSHI JOHRI

The interpretations put forth are based on my reading and understanding of the original texts.
The books, articles and websites etc. which have been relied upon by me have been duly
acknowledged at the respective places in the text.

For the present project which I am submitting to the university, no degree or diploma has been
conferred on me before, either in this or in any other university.

Date : September 11, 2019 RAVI KANT

Roll No. - 111

Semester V B
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CERTIFICATE

MS.SHATAKSHI JOHRI

Assistant Professor

University Five Year Law College

This is to certify that RAVI KANT student of V semester of University Five Year Law College,
University of Rajasthan has carried out the project entitled “DUTIES OF TRUSTEE” under my
supervision and guidance. It is a case study of a minor project. The student has completed
research work in my stipulated time and according to the norms prescribed for the purpose.

Supervisor

MS.SHATAKSHI JOHRI
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ACKNOWLEDGEMENT

I have written this project “DUTIES OF TRUSTEE” under the supervision of

MS,SHATAKSHI JOHRI, Faculty, University Five Year Law College, University of
Rajasthan, Jaipur. His valuable suggestions herein have not only helped me immensely in
making this project but also in developing an analytical approach to this work.

I found no words to express my sense of gratitude towards our director Dr. Sanjula Thanvi for
constant encouragement at every step.

I am extremely grateful to librarian and library staff of the college for the support and
corporation extended by them from time to time.

RAVI KANT
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TABLE OF CONTENTS

DECLARATION

CERTIFICATE

ACKNOWLEDGEMENT

CHAPTER - 1

INTRODUCTION

CHAPTER – 2

2.1 TYPES OF DUTIES

2.2 BRIEF OVERVIEW OF TRUSTEE DUTIES

2.3 BREACH OF DUTIES

CHAPTER – 3

LEAGAL PROVISION INVOLVED

CHAPTER-4

CONCLUSION

BIBLIOGRAPHY
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CHAPTER 1

INTRODUCTION

A trustee is an entity or person formally appointed to manage the assets of a trust for the benefit
of its beneficiaries in accordance with the terms of the trust. A trustee owes fiduciary duties to
the beneficiaries. These duties are typically set out in the trust deed or provided by Statute.

A Trust is merely one form of contract in which the Settlor (also sometimes called the “Trustor”
or “Grantor”) creates a document (“Trust”) which appoints a person to take care of another
person. The person appointed is the Trustee and the person for who the benefit is created is the
“beneficiary.” Unlike most contracts, however, the law and the courts impose upon the Trustee a
fiduciary duty, the highest duty known to law, and the Trustee can find him or herself subject to
such liabilities even decades after the alleged wrongdoing.

The Settlor can limit the obligations and to some extent even the liability faced by the Trustee by
appropriate wording in the Trust. The key is to balance some reasonable limit on the Trustee’s
liability with adequate protection to the beneficiaries. It is to be remembered that the
beneficiaries may be children or incompetents and not capable of protecting themselves and the
limitations of liability may increase their exposure. It is also to be remembered that quite often
Trustees die or become unwilling to act and successor Trustees are appointed and those full
liabilities may be necessary to protect the beneficiaries from the new Trustees. . The trustee’s
fiduciary duties include a duty of loyalty, a duty of prudence, and subsidiary duties. The duty of
loyalty requires that the trustee administer the trust solely in the interest of the beneficiaries. The
duty of prudence requires that the trustee is held to an objective standard of care in managing the
trust property. Subsidiary rules include the duty of impartiality , the duty not to comingle trust
property and the trustee’s personal property, and the duty to inform and account to beneficiaries.
The trustee will always have duties, or the trust will become passive and legal title will pass to
the beneficiaries.

If there are multiple trustees, they carry a dual accountability for their own actions, inactions, and
decisions as well as those of their co-trustees. At common law, when there were multiple
trustees, each had an obligation to participate in trust administration unless otherwise specified.
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CHAPTER 2

2.1 TYPES OF DUTIES:-

Duty to manage the trust efficiently

To manage a trust efficiently, a trustee must be very familiar with the terms of the trust, the
trust’s assets and liabilities, the circumstances of the beneficiaries and the purpose of the trust.
Effective management systems should be in place to ensure that the appropriate decisions are
made in a timely manner and taking into account the terms of the trust and the interests of the
beneficiaries. This also includes effective communication with related parties and proper record
keeping.

A trustee also has a duty to invest prudently on behalf of the trust and should diversify the
investment of trust assets in the interest of beneficiaries.

Duty to the terms

A trustee must know and adhere to the terms of the trust which are prescribed by the trust deed.

Duty of loyalty

Trustees have a fiduciary duty towards beneficiaries. A trustee must administer the trust solely in
the interest of the trust beneficiaries and cannot place his or her interest in conflict with
beneficiaries. Trustees should not profit personally from their role as trustees other than a fee
which they may receive for their trusteeship.

Duty to manage the trust efficiently

To manage a trust efficiently, a trustee must be very familiar with the terms of the trust, the
trust’s assets and liabilities, the circumstances of the beneficiaries and the purpose of the trust.
Effective management systems should be in place to ensure that the appropriate decisions are
made in a timely manner and taking into account the terms of the trust and the interests of the
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beneficiaries. A trustee also has a duty to invest prudently on behalf of the trust and should
diversify the investment of trust assets in the interest of beneficiaries.

Duty to act personally

Trustees act personally and must be involved in decision-making in respect of a trust. While
trustees are typically permitted to engage advisers such as lawyers and financial advisers, the
final decision on trust matters should be made by the trustee. In certain circumstances, trustees
may delegate powers to third parties by power of attorney or deed of delegation. This must be
permitted by the trust deed. For example, delegating powers to an agent to purchase or sell
property overseas. The trustee is still obliged to properly instruct and supervise the agent.

Duty to consider the beneficiaries

A trustee must act impartially with respect to the beneficiaries by considering all beneficiaries in
their decision making. They should also not follow the instructions of the settlor but may give
consideration to the wishes of the settlor which are not binding unless included in the terms of
the trust.

Duty to account

Unless otherwise provided by a trust, a trustee must keep trust accounts and other records. They
must also respect beneficiaries’ rights with regard to requests for trust information. Generally,
beneficiaries have a right to receive information about the trust but not the decisions of the
trustee.

Basic Duties:

The duties of a Trustee may vary from state to state, but in general, a Trustee's duties are as
follows:

1. The Trustee has a duty to carry out the trust in accordance with the terms of the trust or will.

2. He or she has the duty to exercise a reasonable degree of skill and care when managing the
trust assets.
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3. He or she owes the highest duty of loyalty to the beneficiaries to administer the trust solely in
their best interests, and put aside his or her own self-interests. No “conflicts of interest” are
allowed at any time and full disclosure of any potential conflicts of interest must be made.

4. He or she has a duty to possess, protect, and preserve the trust property. He or she must also
defend the trust and the beneficiaries against anyone who would challenge the validity of the
trust or seek to claim trust assets.

5. He or she has a duty to separate and set aside the trust property and is required to keep the
trust property separate from his own property. If the Trustee should co-mingle his property with
the trust's property, he or she is liable for any losses that could result from the co-mingling.

6. He or she has a duty to make the trust property productive. He or she must act in a prudent, or
sensible manner when it comes to investing, acquiring, selling, and managing the trust property.

7. Depending on the terms of the Trust instrument, the Trustee normally must file with the Court
an accounting, often every year, indicating income and outgo and status of all assets.

2.2 BRIEF OVERVIEW OF A TRUSTEE'S DUTIES:-

1. Fiduciary Responsibility. . As a fiduciary, you will be held to a very high standard,

meaning that you must pay even more attention to the trust investments and
disbursements than you would for your own accounts.
2. Investment Standards. Your investments must be prudent, meaning that you cannot
place money in speculative or risky investments.
3. Distributions. Where you have discretion on whether or not to make distributions to a
beneficiary you need to evaluate the beneficiary's current needs.
4. Accounting. In strict trust accounting, you must keep track of and report on principal
and income separately.
5. Taxes. Depending on whether the trust is revocable or irrevocable and whether it is
considered a "grantor" trust for tax purposes, the trustee will have to file an annual tax
return and may have to pay taxes.
6. Fees. Trustees are entitled to reasonable fees for their services.
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2.3 BREACH OF DUTIES:-

A Trustee is accountable to the beneficiary for the trust estate. A Trustee may be held
liable for breaching his duty to the beneficiary of a trust. Further, a Trustee who exercises
powers beyond his authority to the harm of the beneficiary may be liable to the
beneficiary. That liability may extend to the acts of agents of the Trustee which, if
committed by the Trustee, would be a breach of the trust. Such liability may include:

(1) Any loss or depreciation in the value of the trust property as a result of the breach.

(2) Any profit made by the Trustee through the breach.

(3) Any reasonable profit which have accrued on the trust property in the absence of breach.

(4) Reasonable attorney’s fees incurred by the beneficiary in bringing an action on the breach.
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CHAPTER 3

LEGAL PROVISIONS INVOLVED

SEC-11. TRUSTEE TO EXECUTE TRUST.-

The trustee is bound to fulfil the purpose of the trust, and to obey the directions of the
author of the trust given at the time of its creation, except as modified by the consent of
all the beneficiaries being competent to contract. Where the beneficiary is incompetent to
contract, his consent may, for the purposes of this section, be given by a principal Civil
Court of original jurisdiction. Nothing in this section shall be deemed to require a trustee
to obey any direction when to do so would be impracticable, illegal or manifestly
injurious to the beneficiaries.

SEC-12. TRUSTEE TO INFORM HIMSELF OF STATE OF TRUST-

PROPERTY.-

A trustee is bound to acquaint himself, as soon as possible, with the nature and
circumstances of the trust-property; to obtain, where necessary, a transfer of the trust-
property to himself; and (subject to the provisions of the instrument of trust) to get in
trust-moneys invested on insufficient or hazardous security.

SEC-13. TRUSTEE TO PROTECT TITLE TO TRUST-PROPERTY.-

A trustee is bound to maintain and defend all such suits, and (subject to the provisions of
the instrument of trust) to take such other steps as, regard being had to the nature and
amount or value of the trust-property, may be reasonably requisite for the preservation of
the trust-property and the assertion or protection of the title thereto.
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SEC-14. TRUSTEE NOT TO SET UP TITLE ADVERSE TO BENEFICIARY.-

The trustee must not for himself or another set up or aid any title to the trust-property
adverse to the interest of the beneficiary.

SEC-15. CARE REQUIRED FROM TRUSTEE.-

A trustee is bound to deal with the trust-property as carefully as a man of ordinary

prudence would deal with such property if it were his own; and, in the absence of a
contract to the contrary, a trustee so dealing is not responsible for the loss, destruction or
deterioration of the trust-property.

SEC-16. CONVERSION OF PERISHABLE PROPERTY.-

Where the trust is created for the benefit of several persons in succession, and the trust-
property is of a wasting nature or a future or reversionary interest, the trustee is bound,
unless an intention to the contrary may be inferred from the instrument of trust, to convert
the property of a in to property permanent and immediately profitable character.

SEC-17. TRUSTEE TO BE IMPARTIAL.-

Where there are more beneficiaries than one, the trustee is bound to be impartial, and
must not execute the trust for the advantage of one at the expense of another.Where the
trustee has a discretionary power, nothing in this section shall be deemed to authorize the
Court to control the exercise reasonably and in good faith of such discretion.

SEC-18. TRUSTEE TO PREVENT WASTE.-

Where the trust is created for the benefit of several persons in succession and one of them
is in possession of the trust-property, if he commits, or threatens to commit, any act
which is destructive or permanently injurious thereto, the trustee is bound to take
measures to prevent such act.
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SEC-19. ACCOUNTS AND INFORMATION.-

A trustee is bound

(a) To keep clear and accurate accounts of the trust-property.

(b), At all reasonable times, at the request of the beneficiary, to furnish him with full and
accurate information as to the amount and state of the trust-property.
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CONCLUSION

Trusts enable individuals to ensure the financial health of loved ones long after they are
gone, but only if they are properly set up and administered. Trustees bear a great personal
responsibility in ensuring that the trust is handled properly. The authors detail the
different types of trusts, their taxation, and the trustee’s responsibilities, providing both
planning strategies and advice for administering trusts after they take effect. Trustees
may be held personally liable for breaches of duty and there are many factors to consider
before accepting a trusteeship. Managing a trust is not straightforward. Any responsible
person will take the time to carefully investigate the obligations and assets proposed to be
placed at her or her disposal prior to assuming this significant responsibility. While it is a
great compliment to be nominated a Trustee by a Grantor, it is also a potential liability
and requires the same degree of care in deciding whether to assume it as will be required
to carry the duties successfully..It may very well be the most important task one is asked
to carry out in one’s life-a degree of trust is demonstrated that eloquently indicates that
someone considers the potential trustee a trust worthy person.
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BIBLIOGRAPHY

 Aqil Ahmed, Equity , Trust, Mortagege &Specific Relief Act ,Central Law
Agency,15th edition , 2014
 B.M Gandhi, Trust , Equity and Specific Relief , Eastern Book Company , 4th
edition , 2007