Trust Administartion Flashcards
Who may be Appointed as a Trustee?
Any Adult of sound mind.
When is a Trustee Appointed?
When it voluntarily accepts the Role.
How many Trustees may be Appointed for a Trust of Land?
Four, and it is important to have at least two to enable Good Receipt.
How may a Replacement Trustee be Appointed?
- By the Court.
- By Statutory Power.
- By the Charity Commission, if the Trust is Charitable.
- By exercise of an Express Appointment Power in the Trust Instrument.
- By Stautory Power relating to Beneficiaries with Saunders v Vautier Rights.
These same Powers may be used to Remove a Trustee.
When would the Court or Charity Commission Appoint a Replacement Trustee?
When the Trust would otherwise fail for want of a Trustee. In deciding, it would consider:
- The Settlor’s or Testator’s wishes.
- The Candidate’s suitability and effect on Trust Administration.
- The Candidate’s current or previous disputes with any Beneficiaries.
When can the Statutory Power to Appoint a Trustee be exercised?
- The Trustee dies.
- The Trustee lacks capacity to act.
- The Trustee is abroad for over one year.
- The Trustee seeks to retire, refuses to act, or is unfit to act.
Who may exercise the Statutory Power to Appoint a Trustee?
- The Trust Instrument’s Nominee to Appoint Trustees.
- If no such person exists, the Surviving or Continuting Trustees.
- If no such people exist, the Personal Representatives of the last Trustee to die.
When may Beneficiaries with Saunders v Vautier Rights exercise their Statutory Power to Appoint a Replacement Trustee?
When the Trust Instrument does not contain an Express Appointment Power.
The Power must be exercised in writing.
When may a Trustee Voluntarily Retire?
- There would remain at least two people or one Trust Corporation to act as Trustees; and
- The Co-Trustees and anyone with Appointment Powers consent.
The Retirement must be made by Deed.
When may a Trustee be Forced to Retire?
- There would remain at least two people or one Trust Corporation to act as Trustees; and
- Beneficiaries with Saunders v Vautier Rights unanimously direct the Trustee to retire in writing.
What are a Trustee’s Statutory Administrative Powers?
- Power of Delegation.
- Power of Investment.
- Power to Change Trust Property.
- Power to Buy and Sell Domestic Land.
Regarding the Trustee’s Statutory Powers, which Powers may a Trustee Delegate?
- The Power of Investment.
- The Power to Buy and Sell Domestic Land.
Both require a Written Agreement with a Policy Statement binding the Agent to comply with Trustee’s Duties.
Regarding the Trustee’s Statutory Power of Investment, what is Trustee’s Main Objective?
To produce appropriate capital appreciation while preserving the Trust Assets.
Regarding the Trustee’s Statutory Power of Investment, which Obligations attach to its Exercise?
The Trustee must:
- Regularly Monitor Investments.
- Ensure the Fund is sufficiently Diversified.
- Consider the Standard Investment Criteria when Investing and Monitoring Investments.
Regarding the Trustee’s Statutory Power of Investment, how does the Attaching Obligation to Monitor differ based on Shareholding?
- The larger the Shareholding, the more active of a Shareholder the Trustee must be.
- If it is a Majority Shareholder, it should use its influence to safeguard its Investment.
Regarding the Trustee’s Statutory Power of Investment, what are the Standard Investment Criteria?
Criteria:
- General Suitability: Is the Investment of a suitable kind?
- Specific Suitability: Is the specific Investment suitable for the Fund?
Relevant Considerations:
- The Fund’s size.
- The Rights of each Beneficiary.
- The Fund’s period of subsistence.
Regarding the Trustee’s Statutory Power of Investment, what are the General Principles Trustees must Observe?
1 —Financial Primacy:
- Trustees must invest to maximise the Beneficiaries financial interests.
2 —Impartiality:
- Trustees must balance the Interests of different Classes and of current and future Beneficiaries.
3 —Professionalism:
- Trustees’ personal, ethical, or moral views are irrelevant, and cannot be allowed to influence investment decisions.
- In rare cases, where all Beneficiaries are Adults of sound mind sharing the same views, Trustees may consider such factors.
4 —Reasonable Reliance on Professional Advice:
- Although not Bound by Professional Advice, Trustees require reasonable grounds to depart therefrom.
Regarding the Trustee’s Statutory Power of Investment, when must a Trustee obtain Professional Advice?
- When it seeks to exercise the Power or peform any of its attaching Obligations; unless
- It reasonably concludes it is unnecessary.
What are a Trustee’s Statutory Dispositive Powers?
- Power of Maintenance.
- Power of Appointment.
- Power to Advancement.
Regarding the Trustee’s Statutory Dispositive Powers, what is the Power of Maintenance and which Interests fall Within and Without its Scope?
Definition:
- The Discretionary Power to apply Trust Income for the maintenance, education, or benefit of a Minor Beneficiary.
Scope of Application:
- Vested Interests.
- Contingent Interests Carrying Intermediate Income.
Scope of Non-Application:
- Prior Interests in Income. For example:
- A Life Interest Trust where the Life Tenant’s Interest in Income outranks the Remainderman’s.
If the Trust was created before 01/10/2014, Trustees must:
- Only disburse such income as is reasonable; and
- Consider other sources available (Accumulated Income) for the same purpose and apply funds proportionately.
Regarding the Power of Maintenance, what happens to Accumulated Income once the Minor becomes an Adult?
It becomes Trust Capital, and the Beneficiary loses Income Rights thereto.
Regarding the Trustee’s Statutory Dispositive Powers, what is the Power of Advancement and which Interests fall Within and Without its Scope?
Definition:
- The Discretionary Power to apply Trust Capital to improve the material welfare of a Beneficiary whose Interest is not Vested in Possession;
- Subject to consent from all Beneficiaries with Superordinate Interests that would be prejudiced.
Scope of Application:
- Contingent Interests.
- Interests Vested in Interest.
Limits on Exercise:
- The Trustee may Advance the Beneficiary’s entire Presumptive Share.
- The Trustee must first consider the Advancement’s impact on other Beneficiaries and the Trust as a whole.
- Any Advancement must be accounted for, either as a flat deduction or a deduction in percentage held.
If the Trust was created before 01/10/2014, the Trustee cannot Advance more than half of the Beneficiary’s Presumptive Share.
Regarding the Exercise of the Power of Maintenance or Advancement, to Whom should the Funds be Given if the Beneficiary is a Minor, and Why?
- To the Minor’s Legal Guardian or Goods or Service Provider.
- This is because Minors cannot give Good Receipt.
- The Trustee must ensure the Funds will be used appropriately by the Recipient; and
- Cease transfer upon detecting misuse.
Trustees can pay Capital directly to Adult Beneficiaries, but must still ensure it is appropriately used.
Regarding the Trustee’s Statutory Dispositive Powers, when must a Trustee Dispose of Income or Capital?
As soon as it becomes obligated to. For Trust Income, this specifically means:
- Paying it to Adult Beneficiaries, Vested or Contingent; or
- Adding it to the Fund as soon as it arises.
If a Trustee has Dispositive Discretion, it must actively consider its exercise and decide within a reasonable time.
Delay may constitute a Breach.
