Trustee powers and duties Flashcards
Who are the legal owners of trust property?
Trustees
Trustees must exercise the rights of legal ownership for the benefit of the beneficiary.
What is an Express Trust?
A trust where an obligation has been intentionally imposed on the trustee
This includes testamentary and other family trusts.
What distinguishes trusts for commercial purposes?
Often have extensive rules and involve professional and paid trustees
Professional trustees are held to a much higher standard.
What are Charity Trustees subject to?
Extensive obligations often prescribed by statute
What are Bare Trusts?
Not a separate type but often have very limited obligations
They simply hold legal title to the trust on behalf of adult beneficiaries.
What are trusts arising by operation of law?
Resulting and constructive trusts
These aim to correct a wrong or unfairness without imposing the same obligations on the trustee.
What are Statutory Trusts characterized by?
Impose extremely limited obligations focusing on the proprietary component
What is the role of a trustee?
- Voluntary – can refuse
- Typically unpaid
- Joint office – often requiring acting together and joint and several liability
- Broad powers curtailed by duties including a general duty to act honestly, in good faith, for the benefit of the beneficiaries
Where are trustee powers and duties found?
Trustee powers and duties are often found in the trust instrument and key statutory provisions in the Trustee Acts of 1925 and 2000.
Define the administrative powers of a trustee.
Administrative powers help trustees comply with their duty to adhere to the terms of the trust and include obligations to safeguard property.
What administrative powers do trustees have under statute?
- Power or investment
- Power to buy and sell property
- Power to raise money by charging existing trust property
- Power to delegate
What is the general power of investment for trustees?
The general power of investment is outlined in Section 3 of the Trustee Act 2000, and trustees have a duty to regularly review investments.
What must trustees consider regarding investment suitability?
Trustees must consider general suitability (whether the investment is of a suitable kind) and specific suitability (whether the particular investment is suitable).
What is the duty of trustees regarding diversification?
Trustees need to diversify investments, which will depend on the trust, and take an overall approach to the risk profile of the trust.
Smaller trust funds may be less able to diversify
Can trustees prefer ethical investments?
Although moral and ethical considerations are generally not relevant, trustees may prefer ethical investments if there is a straightforward choice between two economically equivalent investments.
Particularly relevant for charitable trusts
What must trustees obtain before investing?
Trustees must consider ‘proper advice’ from a person they reasonably believe to be qualified to provide it, as per Section 5 of the Trustee Act 2000.
What powers do trustees have regarding property?
Trustees have the power to buy and sell property for investment purposes or for occupation by a beneficiary, as stated in Section 8 of the Trustee Act 2000.
What are the delegation powers of trustees?
Trustees can delegate powers of investment and to acquire land, but only if evidenced in writing (Section 11 of the Trustee Act 2000). The agent must adhere to the same restrictions as the trustee.
What should trustees consider when delegating powers?
Trustees should consider the appropriateness of the agent, ensure the agreement complies with statutory requirements, and regularly review the arrangement.
What are Dispositive Powers?
Powers to help distribute the trust property in accordance with the terms of the trust.
What dispositive powers do trustees have under statute?
- Power of appointment
- Power of maintenance
Do powers need to be exercised?
No.
What are Powers of Maintenance?
Common in cases involving minors, allows trustees to apply trust income to maintain a beneficiary, and often includes a power to advance capital.
What is the Statutory Duty of Care?
To exercise such care and skill as is reasonable in the circumstances (s 1 TA 2000).
How does the standard of care differ for trustees?
The standard of care is always higher for professional trustees and raised for lay trustees who may have been appointed based on particular skills.
What is the Common Law Duty of Care?
Requires trustees to exercise the standard of diligence and care expected of an ordinary prudent business owner.
