Running a Trust

Question 1

s.36 TA 1925

Answer 1

The person nominated in the trust instrument for appointing trustees, or if not, the remaining trustee(s)/the PR of the last surviving trustee can, by writing:

• Appoint a new trustee in substitution; or
• Appoint additional trustees

Question 2

Reasons why may appoint a new trustee in substitution

Answer 2

If a trustee is:

• dead
• out of the UK for a year
• desiring to be discharged
• refusing to act
• unfit to act
• incapable of acting
• an infant

Question 3

Property automatically vests in the trustee

Answer 3

s.40 TA 1925

Question 4

Court will only appoint trustees where it is inexpedient, difficult or impracticable for the appointment to be made without the court

Answer 4

s.41 TA 1925

Question 5

A trustee can retire without replacement if

s.39 TA 1925

Answer 5

• there are at least two trustees remaining;
• he declares his discharge by deed; and
• the other trustees consent by deed

Question 6

Beneficiaries can remove and appoint trustees by writing if:

s.19 TLATA

Answer 6

• no one nominated for the purpose of appointing new trustees; and
• beneficiaries are of full age, capacity and taken together are absolutely entitled to the trust property

Question 7

‘Investment’ is something expected to produce income and/or capital growth

Answer 7

Harries

Question 8

An unsecured loan is NOT an investment

Answer 8

Khoo Tek Keong

Question 9

General duties of investment for a trustee

Answer 9

• Act impartially between the beneficiaries
• Not to place self in position of conflict between personal and trust interests/obligations
• Act in best interest of beneficiaries.

Question 10

The best interest of beneficiaries is the best financial interests

Answer 10

Cowan v Scargill

Question 11

Reasons trustee need not act in best interests of beneficiaries

Answer 11

If:

• ethical investment yielded as good a return;
• beneficiaries are adults and have strong relevant ethical views;
• it is not appropriate (ie charitable trustees)
• settler has so provided in the trust instrument

Question 12

Trustees can make any investment that they would make if they were absolutely entitled

Answer 12

s.3(1) TA 2000

Question 13

Statutory duty of care

Answer 13

s.1 TA 2000

Question 14

Purchase of land in UK can be for investment or other purposes

Answer 14

s.8 TA 2000

Question 15

For day-to-day runnings of trusts, trustees have common law standard duty of care:
How an ordinary prudent man of business would conduct his own affairs

Answer 15

Speigh v Gaunt

Question 16

Trustee can sued if:

Answer 16

Gain made by trust fund is less than gain made by reasonable man would be (Nestle)
Trustees’ investment decision was one which no reasonable trustee would take (Olswang)

Question 17

Trustee cannot delegate unless they have authority to do so

Answer 17

Pilkington v IRC

Question 18

Trustee can delegate delegable functions to agents

Answer 18

s.11 TA 2000

Question 19

Trustees cannot delegate:

Answer 19

• ‘Dispositive’ powers or discretions which involve the distribution of trust capital/income amongst beneficiaries;
• Power to appoint new trustees

Question 20

A beneficiary cannot be appointed as an agent, even if also a trustee

Answer 20

s.12 TA 2000

Question 21

Agents appointed under s.11 are subject to the usual conditions attached to such power

Answer 21

s.13 TA 2000

Question 22

Trustees must review the performance of agents

Answer 22

s.22 TA 2000

Question 23

Trustees can pay agents reasonable remuneration out of the trust funds

Answer 23

s.32 TA 2000

Question 24

Liability of agents

Answer 24

Trustees may be able to sue in negligence or breach of contract and hold the damages on trust for the beneficiaries

Question 25

Liability for trustees

Answer 25

Trustees are NOT vicariously liable for their agent’s breaches unless they have breached their own duty of care with respect to selection and review of agents

Question 26

A trustee may execute a power of attorney if he wishes to delegate his office

Answer 26

s.25 TA 2000

Question 27

A trustee can appoint an attorney to act as alter ego for up to 12 months

Answer 27

s. 1 and s.2 TA 1925

Question 28

Within seven days of giving a power of attorney, the trustee must give written notice to anyone who can appoint new trustees and all existing trustees

Answer 28

s. 4 TA 1925

Question 29

Trustees are vicariously liable for attorney’s acts

Answer 29

s. 7 TA 1925

Question 30

Trustees may appoint, and vest trust property, in nominees

Answer 30

s. 16 TA 2000