Professional Trustees: Use of Trustee Exoneration Clauses

In a measure that will be welcomed by all professional trustees, and by their professional indemnity insurers, the Government has signalled approval of the continued use of this important layer of protection for trustees. 

A trustee "exoneration" clause (or trustee "exemption clause") seeks to limit or exclude a trustee's liability for negligence and/or breach of trust.   When a trust contains such a clause it controls the risk faced by trustees and keep costs down, encouraging prospective trustees to take office.  However, these clauses have been under the spotlight for many years.  They have attracted criticism for giving too much protection to trustees who are paid to perform their duties.  The high watermark of this was reached when the Law Commission suggested that professional trustees should not be able to rely on any clause excluding liability for breach of trust arising from negligence (see Trustee Exemption Clauses (2003) Law Com Consultation Paper No 171).