Chapter 10: Trustees

Question 1

who cannot be appointed as a trustee?

Answer 1

Legally bankrupt

Convicted of dishonesty or deception offences

Lack capacity (mental disorder, ill health, disability)

Question 2

what are minimum/ maximum requirements of trustees?

Answer 2

personalty - 1 min no max

realty - 2 min 4 max

Question 3

why does there need to be a minimum of 2 trustees over land?

Answer 3

if a person wants to buy a legal interest in land free of beneficial interest. Can do so if the price is paid to 2 trustees.

Question 4

what is the right of survivorship?

Answer 4

property is held by 2 or more tenants/ trustees - when one person dies the property automatically passes to the survivors

Question 5

who can appoint replacement/ additional trustees and in what order?

Answer 5

Persons nominated by the trust instrument for this role

Surviving/ continuing trustees OR PRs of the last surviving trustee

The court (last resort)

Question 6

what will equity not allow?

Answer 6

a trust will not be frustrated in the absence of a trustee.

Question 7

what are the circumstances when a new trustee might needed to be appointed?

Answer 7

• Dead
• Out of UK more than 12 months
• Desires to be discharged
• Refuses to act in the trusts
• Unfit to act
• Incapable of acting - Disability, health reasons
• Infant
• Removed under a power contained in the trust instrument

Question 8

what is the limit on the number of additional trustees?

Answer 8

4

Question 9

what are the requirements for beneficiaries to appoint trustees in a trust of land?

Answer 9

Must be adults
Must be mentally capable
Together absolutely entitled
Must all be in agreement

Question 10

when can a beneficiary give directions?

Answer 10

no one nominated by the trust instrument to give appointment.

Question 11

what directions can beneficiaries give?

Answer 11

written direction to trustee to retire

written direction to trustees to appoint a specified person

Question 12

what are the requirements for a trustee to retire?

Answer 12

Must be at least 2 trustees remaining OR
Trust corporation

Replacement trustee/ remaining trustees must consent by deed

Question 13

when would a substitute trustee be needed?

Answer 13

Trustee lacks capacity

No one else is entitled/ willing and able to appoint

Question 14

what are the court’s powers of trustee appointment?

Answer 14

Suitable/ practical!!

Order to appoint

Remove, substitute or appoint additional trustees

Can act as though there are no existing trustees

Question 15

what is a public trustee?

Answer 15

trust corporation

Question 16

what is a judicial trustee?

Answer 16

appointed by High Court because trustee failed their administration

Question 17

what must be completed when there is an appointment of a new trustee and why?

Answer 17

deed of vesting - legal property rights must be vested to trustees

Question 18

In what circumstances will trusteeship be terminated?

Answer 18

Disclaimer
Death
Retirement
Removal

Question 19

when can a person disclaim their duty as a trustee?

Answer 19

only refuse to act as a trustee before acceptance

Question 20

how can a person disclaim their trusteeship?

Answer 20

deed, oral or inferred conduct after a length of time

Question 21

what are the conditions for a trustee to retire?

Answer 21

Deed declaring desire to retire

Remaining trustees must consent in the same deed

Must be a trust corporation or 2 trustees

Question 22

What are the duties in trustees when appointed?

Answer 22

Ascertain terms & identify beneficiaries

Examine documents

Proceed against any trustee in breach

Locate property and vest in their name

Question 23

What are the continuing duties of trustees?

Answer 23

Exercise powers with the other trustees

Account and records

Act impartially

Investing

Ensure personal interests do not conflict with duty

Question 24

what are the differences in standards of care of a trustee?

Answer 24

Lay trustees = reasonable care and skill

Relevant knowledge/ experience = higher standard of care

Professional trustees: higher standard of care

Question 25

What are the 4 guiding principles over the duty to invest?

Answer 25

Even- handed to all beneficiaries Meaning of investment Modern portfolio theory Power to invest

Question 26

what does it mean to be even-handed?

Answer 26

Treat all beneficiaries equally when handling investment

Question 27

what is an example of being heavy handed?

Answer 27

If the is a life and remainder interest must choose investments that produce income (life interest benefit) and protect capital (remainder interest benefit)

Question 28

what is the meaning of investment?

Answer 28

Investments for income yield - benefit of beneficiaries Investment for value increase overtime (capital growth) - the benefit of the trust

Question 29

what is the modern portfolio theory?

Answer 29

a standard of care risks of investment - look at the entire investment portfolio

Question 30

What is the statutory power of investment for beneficiaries?

Answer 30

make any kind of investment as though they were absolutely entitled to trust assets

Question 31

what is the standard investment criteria for trustees?

Answer 31

review consider changes (diversification) obtain advice from someone qualified

Question 32

interests of the beneficiaries is the most important?

Answer 32

financial interests

Question 33

When can a trustee consider non- financial investment considerations?

Answer 33

Express in trust instrument Beneficiaries are sui juris and have given consent When using a ethical investment policy to show investments are as financially good as those rejected

Question 34

in what kind of trust will trustees look at other considerations?

Answer 34

charitable trusts

Question 35

what are the powers of trustees?

Answer 35

power of maintenance power of advancement

Question 36

what is power of maintenance?

Answer 36

Apply for income toward the benefit of a beneficiary e.g maintenance/ education

Question 37

what can a beneficiary apply for on behalf of a minor?

Answer 37

whole/ part of trust income toward maintenance

Question 38

what does 'trust carries immediate income mean'?

Answer 38

Entitled to income earned by a gift until the gift is actually transferred.

Question 39

what interest must a minor beneficiary have to be granted maintenance?

Answer 39

vested or contingent (trust must carry immediate income for continent interests)

Question 40

what is a limitation on the power of maintenance?

Answer 40

Subject to prior interests - where a beneficiary is absolutely entitled to income

Question 41

what type of trust does the power of maintenance NOT apply to?

Answer 41

discretionary trusts - no automatic right to benefit only to be considered

Question 42

what is the power of advancement?

Answer 42

advanced payment from trust capital for the material/ financial benefit of a beneficiaries current situation.

Question 43

what happens of a beneficiary misapplies the money?

Answer 43

MUST not make any more advances until the money is properly applied.

Question 44

What is the limit on advancement?

Answer 44

Must not exceed beneficiary share of trust assets

Question 45

what happens when an advancement has been made and the beneficiary becomes absolutely entitled to their share?

Answer 45

must be deducted Add the advanced amount to the current value of the trust. Calculate the shares each beneficiary will receive. Take the mount advanced from the recipients share.

Question 46

who must give consent to an advancement?

Answer 46

Someone with a prior life interest (adult) must give consent in writing

Question 47

what was the limit on the amount of advancement before oct 2014?

Answer 47

max amount was half of the presumptive share

Question 48

what powers are discretionary for trustees/

Answer 48

power of maintenance power of advancement