Serving on a Board of Trustees is both an honor and a legal responsibility. Trustees are fiduciaries — individuals legally obligated to act in the best interests of the organization. Whether you serve a nonprofit, educational institution, or foundation, understanding your legal duties is essential. 

In this blog, we explain the three core legal duties of a board of trustees and how each one safeguards the mission, integrity, and accountability of the organization. 

 

1. Duty of Care 

The duty of care means that trustees must act with the same care and diligence that an ordinary, prudent person would use in similar circumstances. This includes: 

• Attending board and committee meetings 

• Staying informed about the organization’s operations and finances 

• Reviewing materials in advance of votes 

• Asking questions and challenging assumptions when necessary 

Failure to exercise duty of care could result in poor decisions, financial mismanagement, or legal risk. 

 

2. Duty of Loyalty 

The duty of loyalty requires trustees to put the interests of the organization ahead of personal or professional interests. Trustees must: 

• Avoid conflicts of interest 

• Disclose any potential conflicts immediately 

• Refrain from using their board position for personal gain 

• Make decisions that benefit the organization, not themselves 

This duty is especially critical when dealing with vendors, employment, or funding decisions that may involve friends or business partners. 

 

3. Duty of Obedience 

The duty of obedience requires trustees to ensure the organization remains faithful to its mission and complies with: 

• Governing documents (like bylaws and charters) 

• Local, state, and federal laws 

• IRS regulations for nonprofits (if applicable) 

• Grant or donor restrictions 

This also includes honoring commitments made to funders, partners, and the public. 

 

Additional Legal Responsibilities 

Beyond the core duties, trustees should also be aware of: 

• Filing obligations (e.g., IRS Form 990 for nonprofits) 

• Oversight of fundraising practices 

• Proper record-keeping and meeting minutes 

• Whistleblower and anti-retaliation policies 

• Insurance and liability coverage (such as Directors & Officers insurance) 

Knowing these responsibilities protects both the trustee and the organization. 

 

Consequences of Breach 

When trustees fail to meet their legal duties, consequences can include: 

• Legal liability: Trustees can be sued for gross negligence or fraud 

• Loss of tax-exempt status: Misconduct can jeopardize the organization’s nonprofit status 

• Reputation damage: Public trust can be lost in cases of unethical or illegal activity 

While most trustees act in good faith, understanding the legal stakes reinforces accountability. 

 

Best Practices for Staying Compliant 

• Attend training sessions on nonprofit law and board governance 

• Establish clear conflict-of-interest and ethics policies 

• Document all board decisions in meeting minutes 

• Regularly review bylaws and policies for compliance updates 

• Maintain open communication with legal and financial advisors 

Being proactive helps avoid costly legal missteps.

 

Conclusion 

Understanding the legal duties of a Board of Trustees is critical for good governance. The duties of care, loyalty, and obedience form the foundation of ethical, responsible leadership. When trustees copyright these obligations, they not only protect themselves — they ensure the organization thrives with transparency, trust, and impact.