Trustees Flashcards
Who can be a trustee?
Any adult can be a trustee except if:
- They are undischarged bankcrupt;
- They have been convicted it often fed involving dishonesty or deception
- They lack capacity to act due to mental disorder, ill-health or other disability
How many trustees
- Trust property is pure personalty - one trustee and no max
- Trust property consists of land - two trustees and max is four.
Who can appoint trustees?
Usually appointed by the settlor or testator.
Right of survivorship
Where property is held by two or more persons as joint tenants, on the death of a joint tenant, the property will automatically pass to the survivors.
Appointment or replacement of additional trustees
The following can appoint new trustees:
- The persons nominated to do so in the trust instrument or if no such person or persons exist;
- The surviving or continuing trustee/s for the time being or the personal representative of the last surviving or continuing trustee;
- The court (last resort)
Appointment of replacement trustees
A new trustee may be appointed (in writing) in the place of a trustee who:
- is dead;
- remains out of the UK for more than 12 months;
- desires to be discharged;
- refuses to act in the trusts;
- is incapable of acting in the trusts;
- is an infant;
- has been removed by a power contained in the instrument
Appointment of beneficiaries in trusts for Land
TOLATA 1996 gives certain beneficiaries the right to appoint or replace their trustees. The beneficiaries must be adults, be mentally capable and together be absolutely entitled to the trust property. The beneficiaries must all be in agreement.
A trustee who has been given a direction to retire must ensure after their retirement there is a trust corporation or at least two trustees remaining. The replacement or continuing trustees must consent to the retirement by deed.
Appointment by the court (last resort)
The court must take into account the following factors:
- wishes and feelings of the settlor;
- will not appoint a trustee who would not be even- handed to a beneficiary;
- whether the appointment would promote or impede the execution of the trust.
Termination - Disclaimer
A person appointed can disclaim before acceptance. Disclaimer can be by deed, oral or inferred from conduct or length of time.
Termination - Death
Trusteeship automatically terminates on death and trust property vests in the surviving trustees. On the death of a sole trustee, the trusteeship devolves onto their personal representatives who may then appoint new trustees.
Duty of care - the standard
Lay trustees must act with such care and skill as is reasonable in the circumstances.
A higher standard is expected of a trustee with relevant knowledge or experience.
Professional trustees are held to a higher standard than lay trustees.
Duty to invest
- Must be even-handedness towards all beneficiaries
- Investment includes income yield and capital growth
- standard of care based on looking at the risk level of the entire portfolio
The power to invest may derive from:
- The trust instrument; or
- The Trustee Act 2000 - trustee to invest as if absolutely entitled but must review at regular intervals and vary the investments based on suitability and the need for diversification. Trustee must obtain proper advice before investing.
Trustees can take ethical considerations into account if:
- They can prove that the ethical investment policy is just as financially sound
- The beneficiaries are all of age and no disability and have consented to it
- The trust instrument authorises it
Power of maintenance
Power to apply income for the maintenance, education or benefit of the beneficiary. This is subject to any prior interests. Not available for discretionary trusts. Applies to all minors with vested and contingent interests.
Power of advancement
To pay the capital (not exceeding the beneficiaries share) for the advancement or benefit of the beneficiary. Once beneficiary becomes absolutely entitled, any advancement must be taken into account. If there is someone with a prior life interest in the trust fund, they must be an adult and give their consent in writing.
For trusts taking effect before 1 October 2014, the maximum amount the trustees can advance is half of the beneficiaries presumptive share.
