What are the risks of being a charity trustee? A guide to managing risk

Trustees are ultimately responsible for the charity’s governance, overseeing its activities and helping to ensure that it is managed in line with its purposes and the law. Analysis by Markel Direct has found that almost one in five trustees could be exposing their personal wealth to potential legal disputes for misconduct, wrongful acts or discrimination. Although the Charity Commission's essential trustee guidance recognises that trustees are usually volunteers and that honest mistakes can happen, it expects trustees to understand their duties, act responsibly and take appropriate action to manage risks.

Understanding these risks, outlined in our article created in collaboration with Markel Law, can help you make informed decisions and reduce your potential exposure to personal liability.

This article focuses on charities and charity trustees in England and Wales. Different regulators and legal requirements apply in Scotland and Northern Ireland.

What are the responsibilities of a charity trustee?  

According to the Charity Commission's essential trustee guidance, charity trustees have six main legal duties: ensuring that the charity operates for the public benefit, complying with its governing document and the law, acting in the charity’s best interests, managing its resources responsibly, acting with reasonable care and skill, and ensuring that the charity is accountable.

As a trustee, you are responsible for the decisions the board makes and cannot rely on other trustees, employees or professional advisers to take responsibility for your duties. However, the Charity Commission expects trustees to recognise when they need additional information or professional advice, especially for complex or significant decisions.

Before accepting a trustee role, you may want to:

• Read the governing document
• Understand the charity’s legal structure
• Review its latest accounts and annual report
• Ask about existing disputes or regulatory concerns
• Review key safeguarding and financial control policies
• Check whether trustee indemnity insurance is in place and understand the scope of the cover
• Understand the expected time commitment

What are the risks of being a charity trustee?

While being a charity trustee can be rewarding, the risks involved will vary depending on your charity’s activities, structure and circumstances. Some of the main risks to consider may include:

• Personal liability for losses caused by breach of duty
• Financial pressures, mismanagement or misuse of charity assets
• Conflicts of interest
• Poor decision-making or inadequate oversight
• Discrimination
• Safeguarding failures
• Breaches of legal or regulatory requirements
• Disputes between trustees, stakeholders or staff
• Fraud and cyber security breaches
• Reputational damage
• Geopolitical risks for charities working internationally

The Charity Commission’s Charity Sector Risk Assessment 2026 identifies governance, financial resilience, safeguarding and risks to public benefit among the areas that require trustees’ attention.

The Commission previously reported that, in 2023, around 11% of charities had only one or two trustees. Small trustee boards may be more exposed to risks involving dominance, a lack of independence and conflicts of interest. In the most recent report, the Commission added that some charities continue to face challenges in recruiting sufficient numbers of trustees, which could affect the ability of boards to provide effective governance.

Can charity trustees be held personally liable?

One concern you may have when becoming a trustee is whether you could be held personally responsible if something goes wrong.

The Charity Commission describes personal liability as “extremely rare”, but not impossible. A trustee may, for example, become liable to the charity for financial loss caused by an improper action or to a third party where the charity cannot meet a legal claim.

Your charity’s legal structure can also affect the level of protection available to trustees. Incorporated charities, such as charitable companies and charitable incorporated organisations, have a separate legal identity. Depending on the structure and circumstances, this may limit trustees’ personal liability to third parties. Trustees of unincorporated charities may have greater personal exposure because the charity is not a separate legal entity, meaning contracts and liabilities may be entered into by trustees personally.

Managing conflicts of interest

A conflict of interest can arise when a trustee’s personal interests or loyalty to another person or organisation could conflict with the charity’s interests.

For example, a trustee could have a financial interest in a business that the charity is considering using as a supplier. A conflict can also arise because of a trustee’s relationship with another organisation.

To comply with the Charity Commission’s guidance, trustees should declare conflicts early, and a conflicted trustee should usually withdraw from any discussion or decision on the matter. Having a conflict does not necessarily mean that a trustee has acted improperly, but it is important to identify, declare and manage it appropriately.

Avoiding discrimination and other unlawful acts

Charities may also face legal risks when providing services, employing people, recruiting volunteers or dealing with members or beneficiaries.

The Equality Act 2010 protects people from discrimination relating to protected characteristics. The legislation can apply to charities when they provide certain services, employ staff or work with volunteers and members, although specific exceptions may apply in certain circumstances.

For example, a charity may be permitted to provide benefits or services to people with a particular protected characteristic where its charitable instrument allows this and the relevant legal tests are met.

The Equality and Human Rights Commission provides updated guidance on services, public functions and associations that also covers discrimination, harassment, victimisation and reasonable adjustments under the Equality Act.

Avoiding misconduct and poor governance

Trustee misconduct does not necessarily involve deliberate wrongdoing, as poor governance, inadequate oversight or failing to follow the charity’s governing document can also create risks.

The Charity Commission opened 313 cases concerning trustee decision-making or possible breaches of its guidance in 2024–25, down from 458 in the previous year. Cases involving disputes within charities rose from 579 to 909.

The Commission says governance risks can contribute to wider risks facing charities. Trustees should ensure that significant decisions, the information considered and the reasons for the board’s decision are recorded clearly in the meeting minutes.

Fulfilling safeguarding responsibilities  

Safeguarding is another important area of trustee responsibility, particularly for charities that work with children or adults at risk.

The Charity Commission has a specific role regarding safeguarding, and reports in the 2026 assessment that, in recent years, around a quarter of the concerns it has received about charities have related to safeguarding.

As a trustee, you need to ensure appropriate safeguards are in place and take reasonable steps to protect people who come into contact with the charity.

The Commission has identified the need for trustees and charity leaders to take particular care when handling allegations against individuals in positions of power or influence. You may need to ensure that your charity has appropriate policies, procedures, training, reporting arrangements and oversight in place.

If a serious incident takes place within your charity, you may be required to report it to the Charity Commission.

Protecting against fraud and cybercrime

Fraud and cybercrime can create significant financial, operational and reputational risks for charities.

The Charity Commission reports an increase in complex casework, including allegations of significant fraud, and shares concerns expressed by the City of London Police, the UK’s National Lead Force for Fraud, which highlighted that fraud and cybercrime offences now account for nearly half of all crime in the UK.

Large organisations, including charities that meet the relevant criteria, need to be aware of the government guidance on the failure to prevent fraud offence, which came into force on 1 September 2025. An organisation may be held criminally liable where an employee, agent, subsidiary or other associated person commits fraud intending to benefit the organisation or, in certain circumstances, one of its clients, and the organisation did not have reasonable fraud prevention procedures in place. Although most smaller charities will fall outside the scope of the offence, the government’s fraud-prevention principles may still provide useful guidance.

You can help protect your charity by reviewing financial controls regularly, documenting fraud risks and providing appropriate training on fraud and cybercrime. Having a clear process for reporting and responding to suspected fraud or cyber incidents can also help the charity act quickly if a problem occurs.

How can trustees manage risk?

Understanding your responsibilities as a trustee is an important starting point, but you can also take practical steps to manage risk for your charity. Risks can become more serious when a trustee board does not maintain sufficient oversight of the charity’s activities, finances and decision-making. Practical steps you can take include:

• Understanding your legal duties
• Making informed decisions
• Maintaining appropriate financial controls
• Keeping conflicts under review
• Reviewing the charity’s risk register
• Protecting personal data and managing cyber security risks
• Managing employee and volunteer risks
• Monitoring the charity’s reputation

When should trustees seek professional advice?

While trustees are expected to make informed decisions and exercise reasonable care and skill, there may be situations where professional advice is appropriate. Seeking advice at an early stage can help trustees understand their responsibilities, manage risks effectively and avoid more serious issues developing.

You may wish to seek legal, financial or specialist advice where:

• You are concerned that a trustee may have breached their duties
• A significant conflict of interest could affect a decision
• The charity is facing serious financial difficulties or potential insolvency
• A safeguarding allegation has been raised
• You suspect fraud, cybercrime or financial misconduct
• You are uncertain about your potential personal liability as a trustee

The Charity Commission expects trustees to recognise when additional information or professional advice is needed, particularly when making complex or significant decisions.

Can trustee indemnity insurance protect trustees?

Good governance and effective controls can reduce risk, but they cannot prevent every allegation or claim. Trustee indemnity insurance can form part of a charity's wider approach to managing the financial risks associated with trusteeship.

Trustee indemnity insurance is not a substitute for good governance, compliance with trustee duties or effective risk management. Cover is subject to the policy terms, conditions and exclusions and may not respond to every allegation, claim or loss.

Depending on the policy and circumstances, trustee indemnity insurance may cover certain claims made against trustees in connection with their role, potentially including some allegations of wrongful acts, breach of duty or negligence. It is important to review your insurance cover regularly and whenever your charity’s activities or circumstances change.

Trustees may also wish to consider charity insurance and legal expenses insurance as part of a wider approach to managing potential legal costs, depending on the cover selected.

FAQs

Can a charity trustee be held personally liable?

Personal liability for trustees is rare, but it can arise in certain circumstances, including where a trustee causes financial loss through a breach of duty. The charity's legal structure can also affect the protection available.

What are the main risks of being a charity trustee? 

Risks will depend on the charity's activities and circumstances, but they can include personal liability, conflicts of interest, financial mismanagement, safeguarding failures, discrimination, poor decision-making and breaches of legal or regulatory requirements.

Does trustee indemnity insurance cover all trustee risks?

No, trustee indemnity insurance does not cover every risk or circumstance. Trustees may wish to review the cover carefully and seek professional advice where appropriate. The cover available depends on the policy wording, exclusions, conditions and circumstances of the claim. For example, the law prevents charity-funded trustee indemnity insurance from covering fines, regulatory penalties or liabilities arising from fraud, dishonesty or wilful or reckless misconduct.

What happens if a charity trustee breaches their duties?

The consequences will depend on the circumstances. A trustee could face regulatory action by the Charity Commission, be required to repay money to the charity or, in some cases, become personally liable for a resulting loss. Trustees should seek professional advice if they believe a breach may have occurred.

Are trustees of an incorporated charity personally liable?

An incorporated charity has a separate legal identity, which may provide trustees with greater protection from certain third-party liabilities. However, incorporation does not protect trustees in every circumstance, particularly where they have breached their duties or acted improperly.

How often should trustees review charity risks?

Trustees should keep significant risks under review and update the charity’s risk register when its activities, finances, people or operating environment change. The appropriate frequency will depend on the charity’s size, activities and circumstances.

Visit our knowledge centre for more help and guidance, or learn more about trustee indemnity insurance.

Please note: This article provides guidance for information purposes only and is accurate at the time of production. It should not be relied upon as a substitute for professional advice when making or taking important business decisions – always seek the services of an appropriately qualified professional. The views expressed by websites referred to are limited to those of the websites, and do not necessarily reflect the views of Markel Direct. Markel Direct is not affiliated with any of the brands, companies or websites mentioned in this article.