Trustee powers and duties Flashcards
When can trustees apply income to minor beneficiaries?
To pay for maintenance, education and benefit.
There must be no contrary provision in the declaration of trust.
There must be no prior interests to overcome (life interest trusts)
Is the power to apply income to minor beneficiaries mandatory?
No - only when the beneficiary turns 18 does this turn into a duty to pay trust income.
Do trustees have a power to advance capital to beneficiaries?
Yes, for both minors and adults, but it must be for the beneficiary’s advancement or benefit (improving their material situation).
This is a discretionary power.
If there is a prior interest via a life interest, their written consent must be obtained.
Is there a limit on the amount of capital that can be advanced to a beneficiary?
October 2014 trusts onwards = can advance all of the beneficiary’s share
Predating October 2014 = can only advance up to half the beneficiary’s share
What is the difference between a trustee’s power and a duty?
Beneficiaries can compel performance of a duty.
Powers should be considered from time to time and must be done so properly.
What standard is applied in respect of trustee’s duties?
An objective standard.
What would a reasonably prudent person of business take in managing similar affairs of their own?
What are the duties of a new trustee? (5)
Ensure proper appointment.
Ascertain trust property and take control.
Review the trust instrument.
Check there are no past breaches.
Create an inventory where there are chattels.
What is a trustee’s duty between beneficiaries?
If their interests conflict, they cannot benefit one over the expense of another.
Where is a continuous preference, this could be a potential breach.
What is a trustee’s duty to act personally and unanimously? (4)
Must ensure 2-4 trustees at any one time.
Decisions should be taken unanimously.
They must be personally active in the running of the trust.
They cannot let experts make decisions, but they can seek advice.
When may a trustee be liable to make good any loss that beneficiaries suffer? (4)
If they leave matters in the hand of a co-trustee without enquiry
Allowing trust funds to remain in the sole control of a co-trustee
Failing to correct a co-trustee’s conduct
Failing to take action knowing a breach of trust was being/had been committed
What is the duty for a trustee to exercise their discretion properly? (5)
When exercising power, a trustee must act:
In good faith
Rationally
For the purpose it was created
With regard to all relevant facts
With regard to any legitimate expectations of the beneficiaries.
Are trustees required to give reasons for their decisions?
Not usually, but they need to manage the beneficiary’s legitimate expectations.
e.g. if they expect an annual capital advance each year, and they do not receive it for that year.
What information is a beneficiary entitled to view?
The trust document or will
The trust accounts
A schedule of trust investments or other documents which show how the property is invested.
What information is beneficiary NOT entitled to view without a court order?
Trustee deliberations on a discretionary power.
Letters of wishes from settlors.
What will a court consider when deciding whether to allow disclosure of documents which the beneficiaries are generally not entitled to see?
Whether it is in the interest of the sound administration of the trust.
Whether it would cause family members to fall out or were to reveal confidential information about the finances or state of health of beneficiaries.
