Trustee Flashcards
S31 power
Maintenance
S32 power
Advancement
Can power of maintenance be varied or excluded
Yes
Can T be obligated to exercise power of maintenance
No it is discretionary
When can power of maintenance be exercised
B has interest in income (vested or contingent)
No B with prior interest
B is minor
Who to give income to when exercising power of maintenance
Minor cannot give good receipt so give to someone over 18 eg parent of B
Does a life tenant get income
Yes
Do adult contingent Bs get income
Yes as it arises before trust vests
As long as B has interest in income and no one with a prior interest
If adult contingent B dies before trust vests what happens to trust property
Estate gets nothing
Cannot reclaim income properly paid before death
When can T exercise power of advancement
B has interest in capital (vested, contingent or remainder)
Payment is for Bs benefit
Not exceed Bs entitlement (or if created pre 1.10.14 not exceed half Bs entitlement)
Payment is taken into account when B becomes entitled to capital
Any B with prior interest is adult and consents
Can advancement of capital be exercised if it would benefit someone other than B
An incidental benefit to others is okay but it must be for Bs advancement or benefit too
Rules regarding retirement of Ts
S36(1) TA 1925- retiring T must be replaced by new T. Appointment in writing.
Deed vests property in new and continuing Ts (except shares)
Either person nominated in trust doc appoints new T or continuing Ts (plus outgoing T is willing)
S39- T can retire without being replaced where there will be 2 Ts left or trust corp. T retires by deed and remaining Ts consent by deed
Is a retiring T liable for future breaches
They remain liable for their own breaches but won’t be liable for future breaches unless they retired to facilitate those breaches
Removal and / or replacement of Ts
S36- grounds for replacing T: dead, incapacity, unfit, minor, out of U.K. for 12m, wants to leave, refuses to act
Writing
Deed to best property (except shares)
Person nominated by doc or if non then remaining Ts and leaving T if willing or PR of last T
S41- court replaces T if expensive to and otherwise difficult. B or T applies to court
S19 TOLATA - B serve written direction on T to retire and (poss) appoint replacement. Not if trust doc allocated person to appoint new Ts or excludes s19
Ba must be of age, capacity and absolutely entitled
Reasonable arrangements to protect Ts rights must be made
There must be 2Ts or trust corp left
T must be replaced or continuing Ts must consent by deed to non-replacement
Max and min number of Ts
Trusts of land need at least 2 and no more than 4 Ts
Other trusts can have more than 4 Ts
Or have a sole trust corp
Ts must be adults with capacity or trust corp
Appointment of additional Ts
S19 TOLATA - B serves written direction on T. Usual s19 requirements apply
S41- court will appoint following application by T or B if expedient and otherwise difficult
S36- the person nominated in trust doc makes appointment or if none then continuing T. In writing. Deed to vest property
If there are two or more Ts how do they hold legal title
Joint tenants
Does survivorship operate between Ts
Yes because they hold it as joint tenants
Can Ts delegate decisions regarding how to invest trust property
Yes can delegate collectively to an independent financial adviser
What if T knows they will be unable to perform their functions for a period of time
Can delegate their functions to an attorney
By deed
Max 12 months
Give written notice to Ts and anyone with power to appoint T within 7 days of delegation
T remains liable for acts of attorney
What docs can B demand to see
Trust doc/ will
Trust accounts
Details of investments
What docs can be withheld from B
Docs recording Ts deliberations on discretion or power
Mins of meeting
Trust diaries
Letters of wishes from S
What if B wants to see a doc that T won’t disclose
Apply to court
Presumption not to disclose docs including reasons
But will disclose if in interest of administration of trust
Will refuse if would cause fall out or disclose private info of Bs finances or health
Do Ts need to give reasons for their decisions
No but if they do give them the court can enquire into soundness
Can the court enquire into the soundness of Ts reasons for a decision
Only if T chooses to give reasons
Exception to general rule that T doesn’t have to give reasons for decisions
If B has legit expectation that discretion will be exercised in their favour the T may have to give reasons and advanced warning if they will exercise discretion differently
Ts duties
Inventory of chattels held on trust Enquire into past business and remedy any breaches Review trust doc and familiarise self with trust Ensure they’re appointed properly Ascertain trust property Obtain control of trust property Consider powers from time to time Duty of care Duty to act fairly between Bs Duty to act personally and unanimously Duty to exercise discretion properly
Do Ts have to exercise powers
No they are discretionary
But should consider from time to time whether to exercise them and if exercised ensure they do so properly
Do Ts have to exercise duties
Yes and if they refuse B can enforce the duty by obtaining a court order
What is Ts duty of care
T must take all those precautions which an ordinary prudent man of business would take in managing similar affairs of his own
Objective standard
Are paid professional Ts held to a higher standard
Yes. Exercise skill and care reasonably expected of experts in that field
What does the duty to act fairly between Bs mean
T must not benefit one B at expense of other
Doesn’t mean Bs must be given equal treatment and no need for T to consult both or either B
No need to give each side a fair hearing
What is Ts duty to act unanimously and personally
CoTs must take decisions unanimously unless doc says otherwise
Ts must be personally active in running trust
Ts cannot let others take decisions for them, can get advice but take decisions themsevles
T must make good loss to B if T allows coT to do all work and doesn’t correct breach of coT
What is Ts duty to exercise discretion properly
B cannot compel T to exercise discretionary powers but can intervene if T exercised power improperly
Once T decides to exercise a power how much it be exercised
In good faith Rationally For purpose it was created With regard to relevant info and not irrelevant info And With regard to Bs legit expectations
Fuduciary duties of T
No competing with trust No payment No self dealing No acting for own benefit Avoid conflicts of interest
Consequences of T breaching fiduciary duty
Personal or proprietary claim
Account for profits
Make good any loss to trust
How to prevent T from competing with trust
Can get injunction
What can B do if T breaches rule against self dealing
Decide to keep transaction or set it aside in reasonable time
Not automatically void
Is rule against self dealing breached even if T pays a fair price
Yes
Is self dealing prohibited even if T has retired
Yes if retired with purpose of transacting with trust
Does honesty of T impact claim for breach of fiduciary duty when there is a conflict of interest
No strict liability
Can B claim profits made by T for breach of fiduciary duty even if there has been no loss to trust
Yes
Can B bring proprietary claim for breach of fiduciary duty to recover property owned by T that represents the personal profit they received from breach even if property went up in value
Yes
Can T ever receive payment without breaching their fiduciary duty
If trust doc allows it
Is Bs consent (18, full knowledge and it’s fair or Bs can later set it aside)
Court order in interests of B
Trust corp
Progressional T who is not sole T but others give consent
Reimbursement for expenses properly incurred when acting on behalf of trust
Statute
Can T be paid for being a D if they are only a D because trust owns substantial share in company
D must give up salary of only a D due to being a T
Is it a breach of fiduciary duty for T to exploit an opportunity / info they only had due to being a T
Breach of fiduciary duty
Even if trust couldn’t have taken advantage of opportunity
T would need authorisation of Bs to use opportunity
Can T delegate investment functions
Yes
Requirements that must be met when T delegates investment functions
Written agreement with agent
Written policy statement for guidance (use care and skill in drafting)
Review arrangement regularly
Use care and skill in selecting person
Is T liable for acts of agent if they have delegated their investment functions
Not if all the requirements to delegate are met Written agreement Written policy statement Review regularly Care and skill in selecting person
What is an investment
Something expected to produce an income return, capital return or both
What doesn’t count as an investment
Unsecured loans
T cannot make unsecured loans unless trust doc allows it
Can T make unsecured loans
Not unless trust doc allows it
What is the general power of investment
That T can make any investment they could make if they were absolutely entitled to trust
What investment can / can’t T make
General power of investment
Must follow any instructions in trust doc
No unsecured loans unless trust doc permits
Can T acquire land
Yes freehold or leasehold in U.K. either as an investment, occupation of B or any other reason
What is the overarching objective duty of care that applies to investment functions
When exercising investment functions T must exercise such care and skill as is reasonable in the circumstances
Higher standard for professional Ts oi
When must T consider standard investment criteria
When purchasing or reviewing investments
What is the standard investment criteria
Investment must be suitable for trust (generally the type of investment and specifically that particular investment)
Diversification so far as is appropriate
Review from time to time
Who should T get advice from when thinking of selling or purchasing or reviewing investments
From someone T reasonably believes is qualified
Are there any circumstances in which T doesn’t need to get advice when reviewing, selling it purchasing investments
When T reasonably thinks it’s unnecessary or inappropriate
How must T act when selecting an investment advisor
Reasonably
Who makes decisions regarding investments
T even where t has recieved advice
What factors must B have regard to when exercising investment functions
Act fairly between Bs
Secure best return for B (not necessarily highest as it might be too risky)
Secure best financial return
Can T consider ethics when investment
Financial considerations take priority
Ts ethics are irrelevant
If S gives guidance in doc must follow this
If charitable T can refuse to invest in things at odds with charitable purpose and might alienate supporters
