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(FLK2) Equity and Trusts > Trust Administartion > Flashcards

Trust Administartion Flashcards

1
Q

Who may be Appointed as a Trustee?

A

Any Adult of sound mind.

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2
Q

When is a Trustee Appointed?

A

When it voluntarily accepts the Role.

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3
Q

How many Trustees may be Appointed for a Trust of Land?

A

Four, and it is important to have at least two to enable Good Receipt.

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4
Q

How may a Replacement Trustee be Appointed?

A
  • 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.

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5
Q

When would the Court or Charity Commission Appoint a Replacement Trustee?

A

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.
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6
Q

When can the Statutory Power to Appoint a Trustee be exercised?

A
  • 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.
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7
Q

Who may exercise the Statutory Power to Appoint a Trustee?

A
  • 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.
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8
Q

When may Beneficiaries with Saunders v Vautier Rights exercise their Statutory Power to Appoint a Replacement Trustee?

A

When the Trust Instrument does not contain an Express Appointment Power.

The Power must be exercised in writing.

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9
Q

When may a Trustee Voluntarily Retire?

A
  • 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.

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10
Q

When may a Trustee be Forced to Retire?

A
  • 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.
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11
Q

What are a Trustee’s Statutory Administrative Powers?

A
  • Power of Delegation.
  • Power of Investment.
  • Power to Change Trust Property.
  • Power to Buy and Sell Domestic Land.
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12
Q

Regarding the Trustee’s Statutory Power of Investment, which Powers may a Trustee Delegate?

A
  • 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.

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13
Q

Regarding the Trustee’s Statutory Power of Investment, what is Trustee’s Main Objective?

A

To produce appropraite capital appreciation while preserving the Trust Assets.

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14
Q

Regarding the Trustee’s Statutory Power of Investment, which Obligations attach to its Exercise?

A

The Trustee must:

  • Regularly Monitor Investments.
  • Ensure the Fund is sufficiently Diversified.
  • Consider the Standard Investment Criteria when Investing and Monitoring Investments.
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15
Q

Regarding the Trustee’s Statutory Power of Investment, how does the Attaching Obligation to Monitor differ based on Shareholding?

A
  • 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.
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16
Q

Regarding the Trustee’s Statutory Power of Investment, what are the Standard Investment Criteria?

A

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.
17
Q

Regarding the Trustee’s Statutory Power of Investment, what are the General Principles Trustees must Observe?

A

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.
18
Q

Regarding the Trustee’s Statutory Power of Investment, when must a Trustee obtain Professional Advice?

A
  • When it seeks to exercise the Power or peform any of its attaching Obligations; unless
  • It reasonably concludes it is unnecessary.
19
Q

What are a Trustee’s Statutory Dispositive Powers?

A
  • Power of Maintenance.
  • Power of Appointment.
  • Power to Advancement.
20
Q

Regarding the Trustee’s Statutory Dispositive Powers, what is the Power of Maintenance and which Interests fall Within and Without its Scope?

A

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.
21
Q

Regarding the Power of Maintenance, what happens to Accumulated Income once the Minor becomes an Adult?

A

It becomes Trust Capital, and the Beneficiary loses Income Rights thereto.

22
Q

Regarding the Trustee’s Statutory Dispositive Powers, what is the Power of Advancement and which Interests fall Within and Without its Scope?

A

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.

23
Q

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?

A
  • 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.

24
Q

Regarding the Trustee’s Statutory Dispositive Powers, when must a Trustee Dispose of Income or Capital?

A

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.

(FLK2) Equity and Trusts (7 decks)

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