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
