Trustee Duties

Question 1

What is the statutory duty of investment?

Answer 1

Any investment decision must be made with regard to the standard investment criteria which are:
(i) the suitability of the investment instruments for the trust; and
(ii) the need for diversification of the portfolio.

Trustees are not required to diversify the investment, but to consider whether this would be suitable.

Trustees are required to obtain ‘proper advice’ before investing.

Question 2

What is the common law duty of self-dealing?

Answer 2

Trustee should not purchase the legal title of trust property for himself. Voidable at the beneficiary’s discretion.

Question 3

What is the common law duty of fair-dealing?

Answer 3

Purchasing the beneficiary’s equitable title. Will be valid if the trustee acts honestly, makes full disclosure to the beneficiaries and pays a fair price.

Question 4

What is the common law duty of investment?

Answer 4

Trustees must:
Act prudently and safely
Act fairly
Do the best for the beneficiaries

Question 5

Trustee’s power of advancement:

Answer 5

Trustees may advance CAPITAL money for the benefit of any person entitled to the CAPITAL or the trust.

Only applies to vested/contingent beneficiaries but not to discretionary beneficiaries.

Does NOT apply to a life tenant (interest in possession trust).

Question 6

Trustees’ power of maintenance:

Answer 6

Trustees may use INCOME from the trust property and pay it in whole/part to the parent/guardian or a minor beneficiary. For maintenance, education or benefit.

Only applies to vested/contingent beneficiaries, not to discretionary beneficiaries.

Question 7

Duties of trustees are obligatory.

Answer 7

Powers of trustees are discretionary.

Question 8

What percentage of a beneficiary’s share can be advanced for trusts/trust interests created or arising prior to October 2014?

Answer 8

Up to one half of the beneficiary’s share can be advanced. Thereafter, any amount of the beneficiary’s share can be advanced.