Recently I have received an increasing amount of enquiries from Trustees as to what their duties are when it comes to acting on behalf of an Estate. This inevitably flows into a conversation of what they can and can’t do with the Estate.
What is the role of a Trustee?
Trustees hold a fiduciary duty to the beneficiary of the Trust (the Estate). This means that they can only act solely in the best interests of beneficiary. In addition, they have a duty to act in good faith, for a proper purpose, to exercise the care, diligence and skill that a prudent person engaged in that profession, business or employment would exercise in managing the affairs of other persons. In other words, the standard is that of a prudent person who holds those skills, not a ‘lay person’. This is an important difference and one that needs to be borne in mind when accepting such a responsibility as being Trustee.
What are a Trustee’s duties under relevant legislation?
In South Australia, trustees are governed by various acts including: The Trustee Act 1936; and the Aged and Infirm Persons’ Property Act 1940.
The latter is only relevant for an Estate that is managed by a Trustee as a result of the incapacity of the beneficiary to do same in their own capacity.
Both Acts outline the role, duties and more importantly, boundaries which informs a Trustee of what they can and cannot do with the Estate.
The Trustee Act 1936 outlines what a Trustee may take into account such as when exercising investment of monies, power to call on shares, purchase a house for the residence of the beneficiary, retain investments, sell property and terms of same.
Section 13 of the Aged and Infirm Persons’ Property Act outlines the Powers of the Manager (which is deemed a Trustee under the Trustee Act 1936) of the protected Estate which is limited to:
- recovering possession of the Estate;
- repairing and insuring against any contingency of any part of the estate;
- demanding, recovering and receiving moneys and personal effect payable to or belonging to the protected person
- carrying on any trade or business of any partnership that the protected person may be a partner; and
- to undertake administration for a grant of probate or administration for the benefit of the protected person.
It also states that the Manager is to apply moneys for the maintenance of the protected person, and their spouse or domestic partner (as per the Family Relationships Act 1975) and children of the protected person. The term “maintenance” whilst broad does not extend to anything beyond the basic needs. A Court order allowing anything beyond basic needs will be required to cover the Manager from any future allegations of breaching their duties as the Court has jurisdiction to confer any such powers upon the Manager it deems appropriate.
It is important for trustees to consult these acts directly and seek legal advice for clarification. The Trustee is also required to submit reports to the Court and The Public Trustee by way of annual statements. Proper accounting for the Estate is critical and any failure to do so would be considered a breach of fiduciary duty. One must always account for their actions when acting on behalf of others.
How can we help?
The role of a Trustee is one of the most highly scrutinised and compliance centred position for good reason. The Trustee has the charge of the affairs, financial and otherwise, of another individual. Nothing in this role can be for self-gain or interest. If you are a trustee and require information about your obligations, or if you are a beneficiary and have concerns with a trustee’s actions, you can reach out to our experienced team via email at [email protected]