The Irreducible Cores of Trustee Obligations

Abstract

The law of trustees’ obligations is built around an enduring contradiction. On the one hand, trustees are subject to a heavy burden of duties. Though breach of those duties does not always lead to compensatory liability, trustees are also subject to a heavy burden of liabilities. On the other hand, drafters of trust instruments often exclude large parts of either or both burdens. In other cases, trustees’ duties are not excluded but undermined, as by subjecting trustees to the directions of a non-fiduciary protector. The law of many common law jurisdictions accepts much of this practice of exclusion and undermining, rendering much of the two burdens default law. Twenty-five years ago, leading trust jurists started referring to the mandatory elements of trusteeship, of trustee obligations or of trust law as an “irreducible core”. This article focuses on the irreducible core of trustee obligations, leaving aside other parts of the law of trusts. The topic encapsulates a dilemma fundamental to the law of trusts: how much of trustees’ burdens, hereinafter discussed as one composite burden, should be subject to contract-style tailoring and elimination, and how much of that burden should be inescapable? The article proposes an answer to that dilemma. I argue that attempts to define a single mandatory core, applicable to trustees of all express, non-charitable trusts except those statutorily subjected to special trust regimes, tend to be unstable. This instability is a result of the large differences between the many contexts in which trusts are used. The law governing trustees of express non-charitable trusts tends to coalesce around several cores rather than one, each applicable to a different context of trust practice. Concluding that the multiple cores trend is desirable, I propose a blueprint for its further development, including irreducible cores for three trust types: (i) settlor-controlled family trusts; (ii) non-settlor-controlled family trusts using remunerated trustees, some or all beneficiaries of which are minors or otherwise vulnerable; and (iii) commercial trusts.

Keywords: trust, trustee, obligations, exemptions, liabilities

JEL Classification: K10, K11