What it means
A trust is an arrangement where one party holds assets for the benefit of others, and the trustee is the person or company doing the holding. Being named in a trust deed or a will does not make someone a trustee, because the appointment has to be accepted first.
Acceptance usually happens by signing a deed of acceptance or appointment, but it can also happen through conduct, such as taking control of trust bank accounts or signing documents as trustee. Acting first and signing later is risky, because acceptance by conduct carries exactly the same duties as a formal signature.
Once accepted, the trustee takes on duties far stricter than ordinary commercial obligations: to act in the beneficiaries' interests, to keep trust assets separate, to keep proper accounts and to avoid conflicts of interest. Breaching those duties can make the trustee personally liable for the losses that follow.
In a business context these roles appear more often than people expect, in employee benefit trusts, pension schemes, share incentive plans, escrow arrangements and family holding structures. A finance director asked to be a trustee of the company pension scheme is being asked to accept a personal legal office, not simply another job task.
The sensible nuance is to look before accepting. Prudent trustees review the trust deed, the asset list, any existing liabilities and the indemnity and insurance position first, because a trustee who accepts a damaged trust inherits the problem along with the title.
Timing is worth planning as well. Where several trustees are appointed together they often accept by signing one deed on the same date, which creates a clean record of when the duties began and who shared them from the start.
In practice
Real-world examples.
Example
A manufacturing group sets up an employee share trust and asks its chief financial officer to become a trustee. She signs a deed of acceptance only after the company agrees to fund trustee indemnity insurance and to pay for independent legal advice. She also asks for the trust deed and the latest trust accounts in writing before the board meeting at which she is appointed.
Example
A named executor and trustee under a will takes control of the deceased's rental property, collects rent and pays for repairs for four months before signing anything. A court would treat that behaviour as acceptance by conduct, with duties running from the date she began acting.
Example
A corporate trustee company is appointed to hold escrow funds for a business sale. It accepts office in writing, opens a separate client account and refuses to release funds until the deed's conditions are met, even when both parties ask informally. Its acceptance letter records the exact assets it is taking on, which protects it from any claim about money that never reached the account.
Case study
Seen in the real world.
Oakhurst Mill Holdings is an invented company used purely as an illustrative example. Its founder set up a family trust holding 40% of the shares and named his two adult children and the company's long-serving finance manager as trustees.
The finance manager signed the acceptance without reading the deed, which required the trustees to review the investment spread annually and to pay a fixed annual amount to a third beneficiary. Three years later that beneficiary complained that no payment had ever been made and that the shareholding had never been reviewed, and all three trustees were exposed personally because each of them had accepted office.
In this fictional outcome the trust bought insurance, the company funded an indemnity for its employee, and future acceptances were made conditional on a written summary of duties prepared by a solicitor. The illustrative point is that acceptance is the moment to ask questions, because afterwards the questions become liabilities.
Watch out
Common mistakes.
- Assuming that being named in a trust deed or will makes someone a trustee automatically. Nobody becomes a trustee without accepting, whether formally or by behaving as one.
- Starting to act before deciding. Collecting income or signing on behalf of the trust can amount to acceptance, which removes the option to decline later.
- Treating a trustee role as part of a day job. It is a personal legal office with personal liability, and a company job title offers no protection by itself.
Questions
People also ask.
Can a named trustee refuse the role?
Yes, a named person may disclaim the office provided they have not already acted as trustee, and the disclaimer should be put in writing.
What should someone check before accepting?
The trust deed and any amendments, the list of assets and liabilities, the beneficiaries, the powers given to trustees and the indemnity and insurance arrangements.
Can a trustee be paid?
Only where the trust deed or the law allows it, since the default rule in many jurisdictions is that trustees act without remuneration apart from reimbursed expenses.
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