Trustee duties and powers

Question 1

Trustees should not make a ________ ______ from their position

Answer 1

personal profit

Question 2

If a trustee is paid for activities undertaken on behalf of the trust, or makes a personal profit due to information gained from their trusteeship, they hold this profit on ____________ ______ for the beneficiaries

Answer 2

constructive trust

Question 3

Anne appointed 2 trustees to hold her residuary estate on trust for her children. The trust fund includes a holding of 50% of the shares in a family company. One of the trustees holds 10% of the shares in the same company. The trustee is appointed to be a director of the company by a 75% majority vote and is paid £5,000 in director’s fees.

Can the trustee keep the fees? Why/why not?

Answer 3

No - he must hold the fees on trust for the beneficiaries as the trust fund holds 50% of the shares, so the trustee would not have been appointed director without the votes attached to the trust shares

Question 4

Is a Trustee entitled to be paid for serving as a trustee?

Answer 4

No - unless the trust provides for this

Question 5

What are 2 exceptions to the rule that trustees generally aren’t paid?

Answer 5

1. Professional trustee
2. Trust corporations

Question 6

A professional trustee may charge their normal professional charges for their services in relation to the trust provided that which 3 conditions are met?

Answer 6

(1) They are not a sole trustee
(2) Their co-trustee(s) consent in writing to their charges
(3) No express provision in the trust instrument relating to the trustees’ charges

Question 7

Trustee may not purchase any _______ owned by the trust - even if they pay ______ or ______ _______ value. Such a purchase is _________ at the instance of the Beneficiaries

Answer 7

property, full, open market, voidable

Question 8

Can a trustee purchase a beneficiary’s interest? If so, what are the requirements

(clue: there’s 3)

Answer 8

Yes

1. Fair price
2. Full disclosure of material facts
3. No abuse of position

Question 9

In what two situations is a statutory duty of reasonable skill and care imposed on trustees?

Answer 9

1. Investment decisions
2. Appointing agents

Question 10

Can a trustee delegate investment decisions? If so, to whom?

Answer 10

Yes - to an investment manager

Question 11

If statutory duty doesn’t apply, Ts are under a duty to act with what standard?

Answer 11

Prudence of an ordinary man of business

Question 12

If there is more than 1 T, they must act _______ and ____________

Answer 12

jointly, unanimously

Question 13

Trustees must act _________ - they have no general power to ________ their functions except __________ ones

Answer 13

fairly, delegate, administrative

Question 14

What is an exception to the T’s delegation rule and what’s the term for the implementation of this rule?

Answer 14

T can delegate all functions to another individual/trust corporation through a power of attorney

12 months

Question 15

Trustees owe a duty to act _________ with respect to the beneficiaries unless the trust provides otherwise

Answer 15

impartially

Question 16

Trustees have a duty to _______ trust funds to produce income

Answer 16

invest

Question 17

What three things must trustees consider when making investment choices (particularly to ensure they’re not liable if the investments fall in value)?

Answer 17

1. Suitability
2. Diversification
3. Proper advice

Question 18

When can Trustees invest in/purchase land?

Answer 18

As an investment, for occupation by the beneficiaries or for any other reason

Question 19

What is the statutory power of maintenance?

Answer 19

Where T can use trust income for a beneficiary child’s maintenance, education or benefit as they see fit

Question 20

If a trustee cannot use the power of maintenance for a minor, what must they do with the income of a trust?

Answer 20

Accumulate the income until the beneficiary is no longer a minor

Question 21

Income accumulated during a beneficiary’s minority is _________ __ ______ to produce further income

Answer 21

reinvested as capital

Question 22

When does the power of maintenance end?

Answer 22

On B’s 18th birthday

Question 23

What is the power of advancement?

Answer 23

Where T can pay or apply capital sums for B’s advancement or benefit in the T’s absolute discretion

Question 24

Is there an age restriction for the power of advancement?

Answer 24

No - but advances to a minor must be applied directly for the purpose or paid to their parent/guardian for this purpose

Question 25

What type of trusts do the statutory power of advancement apply to?

Answer 25

Fixed trusts

Question 26

Whose consent must a trustee obtain before using the power to advance capital?

Answer 26

Any beneficiary with a prior interest in the income of the fund

Question 27

Does consent need to be gained from a beneficiary with a concurrent interest with another before a trustee makes an advancement of capital?

Answer 27

No

Question 28

Does the power of advancement apply to a beneficiary who only has an interest in the income?

Answer 28

No - the beneficiary must have an interest in the capital

Question 29

Where trustees have been accumulating surplus income during a child’s minority, the accumulated income accrues to ______ once the child attains the age of 18.

When the beneficiary’s interest in capital vests, he becomes entitled to the ________ income as well as the ______

Answer 29

capital, accumulated, capital

Question 30

When can trust beneficiaries bring a trust to an end and require Ts to transfer the funds to them in shares they agreed? (3 requirements)

Answer 30

1. Bs are of full age and capacity
2. Have absolute entitlement to whole equitable interest
3. Unanimous agreement

Question 31

Under the Trustee Act 2000, trustees are limited to purchasing land in which country?

Answer 31

United Kingdom