Trustees

Question 1

Is the office of trustee voluntary?

Answer 1

Yes - general principle that no one is required to accept the office of trustee

Question 2

Can trustees be remunerated for their role?

Answer 2

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

Question 3

Where there are multiple trustees, how should they act?

Answer 3

They should act together and all take an active role in the trust - otherwise opening themselves up for breach of trust

Question 4

Are there any legal restrictions on who can be a trustee?

Answer 4

Anyone except a minor

Question 5

Are there legal rules as to how many trustee should be appointed?

Answer 5

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)

Question 6

Are there any practical requirements settlors should have in mind when appointing trustees?

Answer 6

Generally preferable to keep numbers low as trustees must act unanimously so easier for administration if lower numbers

Question 7

What two ways are there for a settlor to appoint a trustee for inter vivos trusts?

Answer 7

• 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

Question 8

What happens if the settlor transfers property to intended trustee who only after transfer disclaims the trusteeship?

Answer 8

The intended trustee will hold the property on a bare trust for the intended beneficiaries pending the appointment of a new trustees

Question 9

How is a new trustee appointed where there is a transfer on trust but the trustee is unwilling to act?

Answer 9

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

Question 10

What happens where the trustees predeceases testator in testamentary trusts?

Answer 10

PRs will temporarily hold the property on trust until the new trustees are appointed

Question 11

How are replacement trustees appointed under testamentary trusts?

Answer 11

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

Question 12

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?

Answer 12

• 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

Question 13

What must PRs do if there is a legacy given absolutely to a minor?

Answer 13

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

Question 14

What are the five ways whereby a new trustee could be appointed to a subsisting trust?

Answer 14

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

Question 15

When can the power to appoint replacement trustees under s 36 TA 1925 be used?

Answer 15

• 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

Question 16

What requirement is there about the form replacement of trustee must have under s 36?

Answer 16

Power to appoint must be exercised in writing

Question 17

How are trustees that have been removed from their role treated?

Answer 17

In the same way as if they had died

Question 18

What is the effect does the dissolution of a corporate trustee have?

Answer 18

Corporate trustee deemed incapable of acting

Question 19

If a trustee is refusing or retiring are they classed as a continuing trustee for the purposes of appointing replacement trustees?

Answer 19

Yes - provided they are willing to appoint replacement trustees

Question 20

Who has the power to appoint new trustees where none of the current trustees are being replaced under s 36(6)?

Answer 20

• person named in the will for this purpose
• if no such named person who is able and willing to act, then current trustees

Question 21

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?

Answer 21

• 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

Question 22

When can beneficiaries appoint new trustees?

Answer 22

When they all have Saunders v Vautier rights, they can collectively change the trustees of the trust using s 19 TLATA

Question 23

Are there any restrictions on beneficiary with Saunders v Vautier rights appointing new trustees?

Answer 23

Power must be exercised in writing and cannot be used where the trust instrument contains an express power to appoint new trustees

Question 24

Why will the court step in to appoint trustees as a last resort?

Answer 24

Because core principle of equity that trust will not be allowed to fail for want of a trustee

Question 25

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?

Answer 25

The charity commission in the case of charitable trusts

Question 26

When exercising its statutory power to appoint trustees, what factors will the court consider?

Answer 26

• 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

Question 27

If the court is appointing a trust corporation, what additional power does the court have?

Answer 27

Power to authorise payment of renumeration to that corporation

Question 28

What power do trustees appointed by the court have?

Answer 28

Same power as if they were originally appointed trustees

Question 29

As a last resort, who will the court appoint as a trustee?

Answer 29

Public trustee to administer the trust - only where no other person is willing to take on the role

Public trustee can charge

Question 30

What powers are there for removing trustees?

Answer 30

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

Question 31

When will the court exercise its statutory power to remove a trustee under s 41?

Answer 31

Envisaged situations - bankruptcy, lack of capacity or trustee is company that is in liquidation or has been dissolved

Question 32

When will the court exercise its common law power to remover trustees?

Answer 32

Where is it not appropriate for the trustee to remain in office eg where they act dishonestly

Question 33

When can a trustee voluntary retire?

Answer 33

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

Question 34

When can beneficiaries direct that a trustee retires?

Answer 34

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