Chapter 8 & 9 Flashcards
Why might trustees need the flexibility to give property or income to beneficiaries before they are strictly entitled?
Circumstances may change, and the law assumes that the settlor would want the trustees to adapt to those changes. If the settlor does not want this flexibility, they can specify so in the declaration of trust.
What is income in the context of trusts?
Income refers to regular payments generated from trust assets, such as interest from bank accounts or dividends from shares.
Can trustees use income to benefit minor beneficiaries?
Yes, trustees can use income to support the maintenance, education, or benefits of a minor beneficiary, as long as there is no provision in the declaration of trust that says otherwise.
Can trustees apply income to a beneficiary if there is a prior interest in that income?
No, trustees cannot apply income to a beneficiary if there is someone with a prior interest, such as a life tenant.
Can trustees give trust property directly to a minor beneficiary?
No, trustees cannot give property directly to a minor. The minor cannot discharge the trustee’s duties, so payments should be made to their parents or a third party.
What happens with income for adult contingent beneficiaries?
Trustees must pay income to adult contingent beneficiaries (over 18) between the ages of 18 and 30, as long as the beneficiary satisfies the conditions in the declaration of trust.
What is capital in the context of trusts?
Capital refers to the underlying property of the trust itself, not the income generated from it.
Can trustees advance capital to beneficiaries before they are strictly entitled to it?
Yes, trustees can advance capital early if the trust document does not prohibit it and the beneficiary has an interest in capital. The advancement must be for the beneficiary’s benefit.
What is required before trustees can advance capital if there is a life tenant?
The life tenant must give written consent before capital can be advanced to other beneficiaries, as advancing capital would reduce the life tenant’s income.
Can beneficiaries compel trustees to advance capital to them?
No, beneficiaries cannot compel trustees to advance capital. The decision is at the discretion of the trustees.
How should trustees handle capital payments for underage beneficiaries?
If trustees decide to advance capital to an underage beneficiary, the payment should not be made directly to the beneficiary but to their parents or another relevant third party.
What are the general duties of trustees?
Trustees must comply with general duties unless the declaration of trust states otherwise. Settlor may include exemption clauses to limit trustee liability.
What is the duty of care for trustees?
Trustees must act with the care of an ordinary, prudent business person. Professional trustees are held to a higher standard.
What duties must a trustee fulfill when starting their role?
A trustee must ensure they have been properly appointed, ascertain the trust property, review trust documentation, and inquire into the trust’s business to identify any past breaches.
What is the trustee’s duty to act fairly between beneficiaries?
Trustees must act fairly and equitably when managing the trust for the beneficiaries.
What is the duty to act personally and unanimously?
Trustees must act personally and take decisions unanimously if there is more than one trustee. Trustees must actively manage the trust unless functions are properly delegated.
What is the duty to supervise other trustees?
If a trustee fails to supervise or correct the actions of other trustees, they are in breach of trust.
How must trustees exercise discretion?
Trustees must exercise discretionary powers rationally, considering all relevant factors. Beneficiaries cannot compel trustees to exercise discretion in a particular way, but can intervene if powers are exercised improperly. Trustees generally don’t need to give reasons for decisions unless there is a legitimate expectation.
What is the duty to disclose trust documents?
Trustees must disclose trust documents, accounts, and lists of investments to beneficiaries upon request. Trustees are not required to disclose other documents like meeting minutes, but courts may order disclosure if there’s evidence of wrongdoing.
