Trustees Flashcards
Is the office of trustee voluntary?
Yes - general principle that no one is required to accept the office of trustee
Can trustees be remunerated for their role?
In the absence of an expressly granted right to remuneration, then no remuneration is available
Professional trusts are however entitled to remuneration for their services
Where there are multiple trustees, how should they act?
They should act together and all take an active role in the trust - otherwise opening themselves up for breach of trust
Are there any legal restrictions on who can be a trustee?
Anyone except a minor
Are there legal rules as to how many trustee should be appointed?
No rules prescribing minimum or maximum number of trustees except for trusts of land
Land - maximum of four trustees and minimum of two (to give good receipt)
Are there any practical requirements settlors should have in mind when appointing trustees?
Generally preferable to keep numbers low as trustees must act unanimously so easier for administration if lower numbers
What two ways are there for a settlor to appoint a trustee for inter vivos trusts?
- self-declaration - if all requirements are met then settlor becomes trustee
- transfer on trust - if trustee is willing, then on transfer of legal title, trustee is appointed
What happens if the settlor transfers property to intended trustee who only after transfer disclaims the trusteeship?
The intended trustee will hold the property on a bare trust for the intended beneficiaries pending the appointment of a new trustees
How is a new trustee appointed where there is a transfer on trust but the trustee is unwilling to act?
1) Firstly, see if there is provision in the trust instrument for a power to appoint trustees
2) If no express power or it cannot be exercised the disclaiming trustee has the power to appoint their own replacement
3) if the disclaiming trustee does not wish to exercise their power
- beneficiaries with Saunders v Vautier rights together have the power to appoint trustees
- as last resort, court has statutory power to appoint trustees
What happens where the trustees predeceases testator in testamentary trusts?
PRs will temporarily hold the property on trust until the new trustees are appointed
How are replacement trustees appointed under testamentary trusts?
1) Firstly, see if there is provision in the trust instrument for a power to appoint trustees
2) If no express power, trustee can be appointed under s 36 Trustee Act 1925
3) if the disclaiming trustee does not wish to exercise their power
- beneficiaries with Saunders v Vautier rights together have the power to appoint trustees
- as last resort, court has statutory power to appoint trustees
What effect does the reason for trustees not taking up the role have on the operation of s 36 TA 1925 and the appointment of trustees?
- if testator named their executors as trustees but the named executors want to renounce their position (ie not become executors) they have the power to appoint new trustees in their place
- if the testator named a third party as a trustee, but that person has predeceased the testator or is unable to act, the PRs will temporarily become trustees. The PRs can then appoint new permanent trustees
- if the testator named a third part as a trustee, but that person wishes to disclaim the trusteeship, they have the power to appoint their own replacement.
- if testator named their executors as trustees but the named executors want to renounce their position (ie not become executors) they have the power to appoint new trustees in their place
- if the testator named a third party as a trustee, but that person has predeceased the testator or is unable to act, the PRs will temporarily become trustees. The PRs can then appoint new permanent trustees
- if the testator named a third part as a trustee, but that person wishes to disclaim the trusteeship, they have the power to appoint their own replacement. If the disclaiming trustees do not wish to exercise this power, then the PRs can appoint permanent trustees
What must PRs do if there is a legacy given absolutely to a minor?
PRs must hold asset on trust for minor, investing these assets in accordance with statutory powers of investment and utilising powers of maintenance and advancement, until minor becomes 18
OR PRs could appoint trustees and give legacy to them. Necessary to appoint at least two by no more than four
What are the five ways whereby a new trustee could be appointed to a subsisting trust?
1) express power to appoint trustees by trust instrument
2) current or outgoing trustees, using statutory powers in s 36 TA 1925 to appoint trustees
3) by beneficiaries using Saunders v Vautier rights
4) By the charity commission in the case of charitable trusts
5) by the court as a last resort
When can the power to appoint replacement trustees under s 36 TA 1925 be used?
- on death of trustee
- if a trustee is abroad for over a year
- if an appointed trustee is a minor or otherwise lacks capacity to act
- if a trustee wishes to retire, refuses to act or it unfit to act
What requirement is there about the form replacement of trustee must have under s 36?
Power to appoint must be exercised in writing
How are trustees that have been removed from their role treated?
In the same way as if they had died
What is the effect does the dissolution of a corporate trustee have?
Corporate trustee deemed incapable of acting
If a trustee is refusing or retiring are they classed as a continuing trustee for the purposes of appointing replacement trustees?
Yes - provided they are willing to appoint replacement trustees
Who has the power to appoint new trustees where none of the current trustees are being replaced under s 36(6)?
- person named in the will for this purpose
- if no such named person who is able and willing to act, then current trustees
Are there any restrictions on the power of person named in will/existing trustees appointing new trustees where none of the current trustees are being replaced?
- yes - power cannot be used to increase the number of trustee beyond four (unless expressly permitted in trust instrument)
- power must be exercised in writing
When can beneficiaries appoint new trustees?
When they all have Saunders v Vautier rights, they can collectively change the trustees of the trust using s 19 TLATA
Are there any restrictions on beneficiary with Saunders v Vautier rights appointing new trustees?
Power must be exercised in writing and cannot be used where the trust instrument contains an express power to appoint new trustees
Why will the court step in to appoint trustees as a last resort?
Because core principle of equity that trust will not be allowed to fail for want of a trustee
The statutory power of the court to appoint a trustee where nobody authorised is able and willing to make the appointment is extended to what other body?
The charity commission in the case of charitable trusts
When exercising its statutory power to appoint trustees, what factors will the court consider?
- the wishes of the settlor or testator
- whether dispute between beneficiaries as to whether person proposed is appropriate trustee
- whether appointment will promote or impeded the trust administration. Court should take reasonable views of existing trustees into account here
If the court is appointing a trust corporation, what additional power does the court have?
Power to authorise payment of renumeration to that corporation
What power do trustees appointed by the court have?
Same power as if they were originally appointed trustees
As a last resort, who will the court appoint as a trustee?
Public trustee to administer the trust - only where no other person is willing to take on the role
Public trustee can charge
What powers are there for removing trustees?
1) may be express powers under trust instrument
2) statutory powers to appoint trustees also effectively extends to removing them where it is considered necessary to do so
3) the court - both statutory and common law power
4) the charity commission for charity trustees
When will the court exercise its statutory power to remove a trustee under s 41?
Envisaged situations - bankruptcy, lack of capacity or trustee is company that is in liquidation or has been dissolved
When will the court exercise its common law power to remover trustees?
Where is it not appropriate for the trustee to remain in office eg where they act dishonestly
When can a trustee voluntary retire?
When following conditions are met:
- the trustee signs a deed declaring an intention to retire
- after the trustee retires at least two trustees 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
When can beneficiaries direct that a trustee retires?
When all beneficiaries have Saunders v Vautier rights.
Direction must be made in writing and requires all beneficiaries to agree
Must be at least two remaining trustees or one trust corporation after retirement
