Trustees Flashcards
Role of trustee?
Trustees will usually be legal owners of trust property – but must exercise their rights for benefit of beneficiary
Voluntary role – must take it on willingly
Remuneration of trustees – NO REMUNERATION – but profession trustees are entiled.
Joint office – more than one trustee – all trustees have to have an active role – others in breach of trust
Trustee obligations? Express trusts?
Express trusts –
- Irreducible core of trusteeship - general duty to act honestly and in good faith
- Testamentary and other family trusts – main role is to comly with terms of the trust
- Trusts for commercial purposes – likely tp have extensive rules relating to administration of the trust – paid to perform their role – held to a higher tsndard
- Chairtable purpose trusts – extensive obligations – mpre strategic than operational –
- Bare trusts – trustee has very limited obligations – simply hold the trust for beneficiaries with fully vested interests
Trusts arising by operation of law?
- Resulting and constructive trusts – imposed by law – arise to correct a wrong and do not impose the same sorts of obligations on trutsees – create a bare trust – must preserve the trust property for beneficiaries
- Statutory trusts – may impose a substantive obligations on trustees
Appointment of trustees?
Who can be a trustee?
- Any person except a minor – need to consider conflcits of interests
How many trustees?
- Trusts for land can only be held by a maximum of 4 persons – also necessary for such truss to have a minimum of 2 trustees
- Good practice to appoint more than 1 trustee
Process for appointing trustees of a new inter vivos trust (lifetime)
- A self declration of trust
- A transfer on trust – trust is constituted once settlor trasnfers legal ttiel to trustee. Trusteeship if a voluntary office – trustees can decline the role – settlor should only transfer when they’ve ocnfifrmed theyre willing to act. However if settlor does transfer to trustee who then dislciams the trusteeship the intended trustee will hold the property on a bare trust for the intended benefcaires pending appointment of new trustees.
o In these instances trust interment can appoint a trustee
o If no express power – disclaiming trustee ahs power to appoint their own replacement
o If not then beenficaries with saudner v vautier rights have power to appoint trustees under s19
o As a last resort the court has a statutry power to appoint trustees under s41 TA
Process for appointing trustees of new testamentary trusts?
- Testator names executors in the will
- If executors are able an diwlling to act they will take legal title to estte if not adminsitartors will be appointed instead
- PR rhen administer the estate
- Sometimes the will also appoint them as trystees
- If tetstaor has named someone different as trustee then PR must transfer property to them
Who appoints replacement trustees for testamentary trusts - Look at trust instrument first
- If the testator names their executors as trustees but the names executors want to renounce their position they have the power to appint new trustees in their plce
- If testator names a third party as trustees – but predeceased – or unable to act – PR will temproairy become trustees, then they can appoint a new trustees
- If testatir names a third party as a trustees, but that person wishes to disclqim the trusteeship gives the disclaiming trustee the power to appoint their own replacement, or PR can name.
Testamanetray gifts to minors?
- Where a legacy is given absolutely to a minot -cannot be paid to minor
- PRs need to hold assets on trust for minor
- PRs can appoint trustees, but NEED TO APPOINT 2.
Replacement of existing trustees? Statutory power?
- If trustee needs to be replaced OR NEED TO APPOINT ADDITIONAL TRUSTEES – power to appoint lies with
- Person names
- Or if no such person is able and willing – continying trustee
This power can be exxecrised - On death of trustee
- If trustee is abroad for over a year
- If appointed trustee is a minor or lacks capacity to act
- If a trustee wished to retire, to unable to act or refuses to act –
- POWER MUST BE EXERCISED IN WRITING
TRUSTEES THAT HAVE BEEN REMOVED FROM ROLE ARE TREATED IS IF THEY’VE DIED
Appointment of additional trustees?
f an additional trustee is to be appointed, and none of the current trustees are being replaced, s
36(6) TA 1925 provides that the power to appoint the new trustee(s) (in writing) lies with:
* The person named for this purpose by the will or trust deed; or
* If there is no such person able and willing to act, the current trustee(s).
This power cannot be used to increase the number of trustees beyond four (unless there is an
express clause permitting this in the trust instrument).
Again, the power to appoint trustees under this section must be exercised in writing
Appointment by beneficaries?
f all the beneficiaries of a trust have Saunders v Vautier rights, they can use those rights to
change the trustees of the trust.
Traditionally, Saunders v Vautier only gives the beneficiaries the power to collapse the trust.
Therefore, if they wanted to change the trustees, the beneficiaries would need to exercise their
Saunders v Vautier rights to collapse the trust and then declare a new trust with new trustees. This
is not ideal from an administrative perspective and may have tax consequences.
There is therefore now also a statutory power in s 19 TLATA which gives beneficiaries with Saunders
v Vautier rights the power to direct the trustees to appoint a new trustee.
This power must be exercised in writing and cannot be exercised in cases where the trust
instrument contains an express power to appoint trustees.
Appointment by the court?
t is a core principle that equity will not allow a trust to fail for want of a trustee.
For this reason, if a trust would be without a trustee because there is nobody authorised who is
able and willing to make the appointment, the court can make the appointment instead. The
court’s power to do this is found in s 41(1) TA 1925.
The power in s 41 is extended to the Charity Commission in the case of charitable trusts: s 69(1)(b)
Charities Act 2011.
When exercising its statutory power, the court will consider the following principles:
(a) The court should consider the wishes of the settlor or testator (if such wishes are expressed or
evidenced in the trust instrument).
(b) The court should not appoint a trustee where there is a dispute between the beneficiaries as
to whether that person would be appropriate.
(c) The court should consider whether the appointment will promote or impede the trust
administration. This means the court should take into account the views of the existing
trustees, but must consider whether those views are reasonable.
If appointing a trust corporation, the court has the po
Removal of trustees?
- Trust instrument may contain rules dealing with removale of trustees
- General statutory power to appint trustees also effiectibelyy extends to removing trustees
Express powers to remove - May be in the trust instruement
Rmeovale by using the statutory power of replacement
Removale by corut or charity commission
Retirment?
Voluntary retirement
A trustee may retire from a trust and be discharged from their obligations without being replaced
provided the following conditions are met the following (s 39(1) TA 1925):
* The trustee signs a deed declaring an intention to retire.
* After the trustee retires at least two trustees (or a trust corporation) remain.
* Written consent by deed of the co-trustees is obtained.
* Any action required to vest the trust property in the remaining trustees is carried out
Retirement at the direction of benficaries?
n addition to having a power under s 19 TLATA to appoint trustees, beneficiaries with Saunders v
Vautier rights also have the power to compel a trustee to retire from the trust. The direction must
be made in writing and requires the agreement of all beneficiaries.
As with voluntary retirement, the power can only be exercised if, after the retirement of the
trustee, there will remain at least two trustees or one trust corporation
