The Duties of a Trustee
The duties of a trustee may be imposed by the law, or by the instrument or deed that sets up the trust. The trustee has to take the care that an ordinary prudent person would exercise in making an investment on behalf of another person. The trustee must also act within the scope of the powers given to the trustee by the trust instrument. To show that the trustee is carrying out these duties properly, it is necessary to know some trust accounting basics that will help the trustee to adequately record the income and expenses of the trust.
A person acting as a trustee therefore, has a duty to administer the trust prudently, in good faith and in accordance with the needs of the beneficiaries. This duty to administer the trust prudently means that the trustee must be able to properly account to the beneficiaries of a trust as to how the trust property has been administered, and there are also duties towards other persons such as the tax authorities. In addition to this, there is a duty to invest the trust property appropriately. To ensure that this duty is being carried out, the trustee must account correctly for the way in which the trust property is used.
The trustee has a duty to keep true and accurate accounts of the transactions carried out. A record of all receipts and payments must be kept and supported by documentation such as receipts and vouchers. The trustees must make sure that the trust accounts are always available for inspection by the beneficiaries.
The trustees may not profit from the trust, or buy or deal in the trust property on their own personal account; however they are entitled to fair remuneration for their work as trustees. This provision for remuneration may be specified in the trust deed, or the trustees may rely on the entitlement to remuneration given to them by law.
With regard to trust investments, these should be reviewed by the trustees from time to time, to ensure the suitability for the trust of retained or proposed investments, and to consider the need for diversification of investments. The trust accounting basics include proper recording of the trust investments in the accounting records, and the retention of sufficient documentation to show the title to these investments.