Trustee essentials: 10 duties that matter most

A trustee’s primary obligation is to adhere strictly to the trust deed. All powers and discretions must be exercised within the boundaries set by that governing instrument. Trustees must familiarise themselves with the deed on appointment, identify all trust property, and ensure the terms are properly carried out. Departing from those terms (unless authorised by all beneficiaries, statute or court order) risks a breach of trust. 

Trustees owe a fundamental fiduciary duty to act honestly and in what they reasonably believe is in the best interests of all beneficiaries. This duty informs all other obligations, including the need to avoid favouring some beneficiaries over others unless expressly permitted by the trust deed. Decision‑making must not be arbitrary, capricious or influenced by irrelevant considerations. 

Trustees must conduct trust affairs with a heightened degree of caution. Professional trustees and REs face an even higher standard, given the expertise they hold out to the public. Courts have emphasised that trustees must remain alert, proactive and diligent, especially in reviewing investments, risks and operational decisions. 

Trustees must protect trust property and invest it prudently. Where the trust deed contains investment directions, these must be followed strictly. In the absence of such directions, state trustee legislation provides broad investment powers but also prescribes factors trustees must consider, such as diversification, liquidity, risk and the needs of beneficiaries. Trustees must be ready to act when doing so would advantage the beneficiaries and cannot adopt a passive approach. 

Trustees must avoid situations where personal interests conflict with fiduciary duties and must not profit from their position unless expressly permitted. These principles underpin strict prohibitions on self‑dealing, using trust information for personal gain, or entering transactions that place duty and interest in opposition. For REs, the Corporations Act modifies the conflict rule by requiring them to give priority to members’ interests where conflicts cannot be avoided. 

While modern trust deeds and statutes allow practical delegation (for example, to property managers or administrators), trustees must still make core decisions themselves. They must not fetter their discretion, bind themselves in advance, or simply act at the direction of others. Even when delegation is permitted, trustees remain responsible for the acts and omissions of their agents, particularly REs, which retain liability for delegates under the Corporations Act. 

Impartiality is central to fiduciary administration.  Trustees must balance the interests of different classes of beneficiaries, such as income and capital beneficiaries, unless the deed specifies otherwise. They cannot prefer one group for reasons unrelated to the trust’s proper administration. For REs, this is reflected in the statutory obligation to treat members of the same class equally and different classes fairly. 

Trustees must keep accurate, up‑to‑date accounts, maintain records of trust property, and be ready to provide beneficiaries with information about the trust’s financial position and investments. While trustees are not required to explain discretionary decisions, beneficiaries generally have rights to inspect trust documents, subject to confidentiality considerations and practical limits. For registered schemes, REs must also meet statutory reporting and disclosure obligations to members and ASIC. 

Trustees enjoy important rights that protect their ability to administer the trust, including rights to indemnity, reimbursement, and judicial advice. A trustee’s indemnity is foundational: it enables trustees to use trust assets to meet liabilities properly incurred. However, indemnity is lost where the trustee acts outside power, breaches duty, or behaves negligently or dishonestly. For REs, statutory rules further refine when indemnity is available. Another important safeguard for trustees is the ability to seek court directions when faced with uncertainty or conflict. Judicial advice can be a useful tool in protecting trustees from personal liability. 

Where breaches occur, trustees may face remedies such as damages, account of profits, injunctions, removal or constructive trust orders. Trustees should seek professional and, where appropriate, judicial advice when uncertain. In insolvency scenarios, the relationship between trustee solvency, scheme property and indemnity rights becomes especially complex. Trustees (and particularly REs) must understand how liabilities, indemnities and statutory powers interact when schemes face financial distress.