Trustees

Question 1

How is an express trust created?

Answer 1

By the settlor executing a trust deed and appointing the first trustees

Question 2

Who can be a trustee?

Answer 2

General rule - any adult person
Exceptions:
- anyone bankrupt
- convicted of dishonesty or deception offence
- lack of capacity

Question 3

How many trustees are required?

Answer 3

Depends on the type of trust property:
personalty - at least 1, no max
land - at least 2 (to enable overreaching), max 4

Question 4

What is overreaching?

Answer 4

It allows a purchaser pf land to take it free of any beneficiaries’ rights

Question 5

Who can appoint new trustees?

Answer 5

In order:
1. the person(s) nominated for the purpose of appointing new trustees
2. the surviving or continuing trustee(s) or the PRs of the last surviving trustee
3. the court as a last resort

Question 6

When can a new trustee be appointed in the place of another trustee?

Answer 6

When the trustee is:
- dead
- remains out of the UK for continuous 12 months
- desires to be discharged
- refuses to act
- is unfit to act (bankrupt etc)
- is incapable to act
- is an infant
- has been removed under a power contained in the trust

Question 7

How can a trusteeship be terminated?

Answer 7

• disclaimer
• death
• retirement
• removal

Question 8

When can a trustee disclaim?

Answer 8

At any time before acceptance but can no longer disclaim once they have accepted. It can be done by deed, oral or inferred

Question 9

What happens when a trustee dies?

Answer 9

Their trusteeship automatically terminates and the trust property vests in the surviving trustees through survivorship. If they are the sole trustee the trusteeship devolves onto their PRs who then may appoint new trustees

Question 10

How can a trustee retire?

Answer 10

• there must be a deed declaring the trustee’s desire to be discharged
• the remaining trustees must consent in the same deed
• there must be a trust corporation or at least 2 remaining trustees

Question 11

How can a trustee be removed?

Answer 11

• same factors as replacement - s36(1) Trustee Act 1925
• by the court
• by the beneficiaries in a trust of land

Question 12

What are the standards of care for trustees?

Answer 12

Lay trustees - such care and skill as is reasonable in the circumstances
Trustee with relevant knowledge or experience - higher standard than one that doesn’t have experience
Professional - higher standard than lay trustees

Question 13

When exercising their power to invest, when can trustees taken into account non-financial considerations?

Answer 13

• they were given express authority to do so by the trust
• the beneficiaries are sui juris (full age & no disability) and have given their consent
• when following ethical investments the trustees can show the investments are as financially sound as those rejected

Question 14

When using their powers of maintenance, what can the trustees do for a minor beneficiary?

Answer 14

At their sole discretion they may apply the whole or part of the income of the trust property towards maintenance, education or benefit of the beneficiary but only if the property is not held on trust for another beneficiary for life, remainder to the minor

Question 15

When is the power of maintenance not available?

Answer 15

In a discretionary trust as the beneficiaries have no automatic right to payment, only to be considered by the trustees

Question 16

When can trustees use their power of advancement?

Answer 16

Trustees may pay or apply, in their absolute discretion, any trust capital in a trust for the advancement or benefit of any beneficiary entitled

Question 17

What is the power of advancement subject to?

Answer 17

• the advancement must not exceed the beneficiary’s share of the trust
• once the beneficiary becomes absolutely entitled to their share, the sum advanced must be taken into account and deducted
• if there is someone with a prior life interest in the trust fund, this person must be an adult and they must give their consent in writing to the advancement

Question 18

What is the meaning of ‘advancement’?

Answer 18

The use of money which will improve the material situation of the beneficiary