Trust 11 - Trustee powers & Duties COPY Flashcards
What is a power of appointment?
A right to choose who, from within a specified class of objects, receives property
Not a trust
If exercised, have absolute discretion as to who benefits
Must satisfy is/is not test
If a trustee is given a power of appointment, what kind of power is it, and the consequence? And if not a trustee?
Trustee = fiduciary power (don’t need to exercise but must consider doing so periodically)
Not Trustee = personal power (don’t need to consider exercising it)
What words suggest a discretionary trust vs power of appointment?
Discretionary: ‘must’
Power: ‘may’
What words suggest a discretionary trust vs power of appointment?
Discretionary: ‘must’
Power: ‘may’
What are discretionary trusts?
Trustees must exercise discretion and do so within a reasonable time
If trustees of a discretionary trust don’t exercise it, what can beneficiaries do (and not do)?
Can sue to enforce trust and ensure discretion is exercised
Cannot compel them to exercise it in their favour
What trustee obligations are there for a discretionary trust?
- Consider range of possible beneficiaries
- Don’t require trustees to identify all people, just an appropriate survey of the class
- Is/Is Not Test: trustee must be able to say with certainty whether any given individual is a member of the class or not
- Requires conceptual certainty
- For evidential certainty, it’s for C to prove that they’re within the class
What happens with a discretionary trust and a power of appointment where the class of objects is too wide?
Discretionary = void
Power = remains valid
What is the trustees’ duty of care?
Must exercise such care and skill as is reasonable
- Consider any special knowledge/experience a trustee has
- Standard of care higher for professional trustees
- Doesn’t apply to all acts of a trustee
What is the power of investment for trustees?
- A trustee may make any kind of investment they could make if absolutely entitled to the assets
- Have a duty to invest where necessary
What must trustees do if they exercise the power to invest?
- Consider standard investment criteria:
(a) suitability (general [kind of investment] & specific [particular investment]), AND
(b) diversification - Take advice (unless reasonably conclude not needed)
- General duty of care
What rules are there for taking advice when exercising power of investment?
- not bound to follow the advice but can only ignore if a reasonably prudent trustee would do the same
- obtain proper advice before exercising power & when reviewing instruments
.
Exception: don’t need to seek advice if reasonably conclude it’s unnecessary
When investing, what is the benefit the trustee must look to acheive?
Financial benefit (not political) but can take views of Bs into account.
What is the power to acquire land?
- Trustees have statutory power to acquire freehold or leasehold in UK (not overseas)
- Can be done for investment or wider purposes
- If done for investment, relevant criteria apply
- Statutory DoC applies
What is the power of delegation?
- Can delegate powers of investment and to acquire land, but cannot for distributive obligations
- Can’t delegate to beneficiaries
- Must be an appropriate agent, reviewed regularly with an agreement that complies with statute
- For investment, must be evidenced in writing
What is the duty to distribute?
must pay as soon as possible
Who can trustees pay income to early
- Minors
- Not adults
Cannot be made where there is a prior interest (so where there is a life tenant with the child reminder, the trustees can’t pay maintenance out of income for the child because it belongs to the life tenant)
Who can trustees pay capital to early
- Minors
- Adults
Can be made if there is a prior interest, but the trustees will need that person’s written consent
Where there is a contingent subsequent interest (i.e. trust holds for A until 21 and if not for B), do the trustees need permission from B before making the payment?
No, B has a subsequent interest. Consent is only required for a prior interest.
If requested, do trustees HAVE to make an advancement?
No. They MAY make an advancement.
What is the power of maintenance s.31 Minor
Power to pay income
- Where a minor has a vested (or contingent) interest in trust, trustees can pay income as they think fit
- Must be used for primary benefit of minor
- does not apply if someone else has prior rights to income (successive interest trust)
What is the power of advancement s.32 anyone
Power to pay capital
- A B who expects to receive capital from trust in future may wish to receive capital before it vests in possession
- Can be used by both adult and minor B, vested or contingent interests
- Trustees can pay up to 100% of entitlement before it vests at all but must get written consent of beneficiaries with prior interest, if they’re of age and of sound mind
- can be used to pay out where there is another beneficiary with a prior interest but that person must agree.
- Must be providing an immediate financial benefit, ensuring money is used for purposes it was provided for
How much advancement can be made?
100% of capital
Do trustees need to check what the B is actually spending the money on?
Yes, or else breach of duty
Do adult beneficiaries have the right to income as it arises?
Usually yes
Should the trustees make payment directly to the minor?
No, they cannot give good receipt
Does the ability to pay maintenance to a child out of income apply to accumulated income?
Yes
