Running the trust - Trustees duties and powers

Question 1

Can beneficiaries force trustees to carry out their duties?

Answer 1

Yes if necessary by court action

Question 2

Statutory duties - Investments - S. 3 and S. 8 - What investments are authorised?

Answer 2

Trustees can make any investment that they could make if they were absolutely entitled to the assets of the trust. Can purchase land as an investment.

Question 3

Statutory duties - Investments - S. 4 - Standard investment criteria

Answer 3

• Suitability to the trust of any particular investment
• The need for diversification of investments of the trust

Question 4

Statutory duties - Investments - S. 5 - Advice

Answer 4

Trustees must obtain and consider proper advice about the way they should exercise their power of investment having regard to the standard investment criteria unless the trustees reasonably conclude that in the circumstances it is unnecessary or inappropriate to do so. Trustees must obtain the advice from a person whom they reasonably believe is qualified to give such advice. Trustees are not obliged to follow the advice they receive but they must give that advice proper consideration.

Question 5

Statutory duties - Investments - S. 1 - Standard of care

Answer 5

Such care and skill as is reasonable in the circumstances. In relation to investments trustees must exercise the same standard of care as would a reasonable businessman.

Question 6

Statutory duties - Delegation - Definition

Answer 6

Trustee’s duty not to delegate unless authorised

Question 7

Statutory duties - Delegation - Collective delegation by all the trustees

Answer 7

Trustees can delegate most functions that relate to the administration of the trust but not dispositive powers which involve the distribution of trust capital or income among beneficiaries.

Question 8

Statutory duties - Delegation - Collective delegation by all the trustees - Paying the agent

Answer 8

Where delegation is permitted trustees can pay the agent reasonable remuneration out of trust funds

Question 9

Statutory duties - Delegation - Collective delegation by all the trustees - Review

Answer 9

Trustees must regularly review the performance of agents and nominees

Question 10

Statutory duties - Delegation - Individual delegation

Answer 10

If a trustee is absent for up to 12 months.

Question 11

Powers of trustees - When to use them

Answer 11

When a beneficiary may not be entitled to the capital of the trust until some future time. This power allows them to apply trust money for the benefit of the beneficiaries.

Question 12

Powers of trustees - Power of advancement - When to use it

Answer 12

Allows trustees to apply part of a beneficiary’s share of trust capital before that beneficiary is strictly entitled to receive it.

Question 13

Powers of trustees - Power of advancement - What it allows trustees to pay

Answer 13

• Capital
• To beneficiaries with an interest in capital
• If the payment is for the beneficiary’s advancement or benefit

Question 14

Powers of trustees - Power of advancement - Advancement or benefit

Answer 14

Means - any use of the money which will improve the material situation of the beneficiary. E.g House, furniture, apprenticeship, education

Question 15

Powers of trustees - Power of advancement - Restrictions

Answer 15

• They can advance monies up to the presumptive share of the beneficiary concerned
• The beneficiary must bring any advancement into account on becoming absolutely entitled
• Anyone with prior interest must be an adult and consent in writing to the advancement. This includes a person with a prior life interest

Question 16

Powers of trustees - Power of maintenance - When to use it

Answer 16

Allows them to apply the income of the trust fund for minor beneficiaries

Question 17

Powers of trustees - Powers of maintenance - What it allows them to pay

Answer 17

Trustees have a discretion to apply trust income for the infant’s maintenance, education or benefit

Question 18

Powers of trustees - Powers of maintenance - Restrictions

Answer 18

While the life tenant is alive, the life tenant has the right to all the trust income and none can be applied for the benefit of the beneficiary. IF THERE IS AN EXPRESS PROVISION DEALING WITH THE INCOME THEN WE CANNOT GIVE INCOME

Question 19

Paying income to adult contingent beneficiaries

Answer 19

Adult contingent beneficiaries are entitled to trust income as it arises
and trustees must pay that income to them, pending the vesting of their beneficial interests.

Question 20

Controlling the trustees - Can the beneficiaries compel trustees to carry out an act in the administration of the trust?

Answer 20

The beneficiaries can compel the trustees to perform their duties if necessary by court action. Trustees are under no duty to exercise a power and the beneficiaries cannot force them to do so. The only duty owed by the trustees is to consider whether to exercise the power.

Question 21

Controlling the trustees - Will the court interfere with the exercise of a discretion or power?

Answer 21

The court will intervene in the exercise of a power or discretion if it is improper.

Question 22

Controlling the trustees - Providing beneficiaries with reasons

Answer 22

Trustees are not obliged to provide the beneficiaries with reasons explaining why they exercised a power or discretion in the way that they did

Question 23

Controlling the trustees - Showing trust documents

Answer 23

Beneficiaries are allowed to see trust documents. Allowed to see trust deed, accounts and trust investments

Question 24

Joint control of all trustees

Answer 24

Trustees are under a duty to keep trust property under the joint control of all trustees

Question 25

Taking decisions unanimously

Answer 25

Trustees must generally take decisions unanimously

Question 26

Retirement

Answer 26

The beneficiaries can direct a trustee to retire if they are of full age and capacity and are together absolutely entitled to the trust fund. They must all be alive and in agreement

Question 27

If there is no charging clause

Answer 27

The solicitor must rely on the trustee act. As a professional trustee the act authorises the professional trustee to receive remuneration provided the other trustees consent

Question 28

Replacement of a trustee

Answer 28

The appointment must be in writing executed by the continuing trustees and the inclusion of the retiring trustee is optional

Question 29

Replacing the trustee when they’ve been outside the Uk

Answer 29

Two trustees could remove their co-trustee on the grounds that he has been outside the UK for more than 12 months. However they can only remove the co trustee on this ground if they appoint a replacement trustee in place

Question 30

Vicarious liability

Answer 30

Trustees are not vicariously liable for the investment choices made by an agent.

Question 31

Exercising any function relating to land and consulting beneficiaries

Answer 31

Trustees exercising any function relating to the land must consult any beneficiary who is of full age and beneficially entitled to an interest in possession in the land and so far as is consistent with the general interest of the trust, give effect to the wishes of any such beneficiary

Question 32

What can the remaining trustee do if the other trustee loses mental capacity?

Answer 32

The continuing trustee can replace the trustee.

Question 33

How can trustees retire?

Answer 33

The outgoing trustee can retire without being replaced so long as there will be two trustees still in office and the trustee retires by deed with the consent of the other trustees.

Question 34

When can trustees claim an indemnity from other trustees?

Answer 34

If there has been a fraudulent breach. Anything else they must claim a contribution.

Question 35

Will the trustees be liable for their delegates?

Answer 35

yes