Trustees' Administrative Powers and Duties

Question 1

what are the administrative powers and duties to be aware of?

Answer 1

(1) power to invest (and associated duties)

(2) duty to obtaining advice while investing

(2) duty of care (statutory and common law)

(3) power to acquire land

(4) power of delegation (and duty to review actions of agents)

Question 2

what are the trustee powers and duties when investing trust property? (5)

Answer 2

Ts have a power and duty to invest trust assets while they hold them and obtain the maximum benefit for the trust and beneficiaries as a whole

powers and duties =
- T can make any kind of investment they want as if they were entitled to the trust property themselves
- T must act in accordance with the statutory duty of care
- T must consider the standard investment criteria while making investments
- T has a duty to regularly monitor and review investments
- T must take advice when making and reviewing investments

Question 3

what is the standard investment criteria? (2 components)

Answer 3

(1) Suitability = T must consider the suitability of the proposed investment
- is the investment of the type that is suitable?
- is this particular investment suitable?
- suitability depends on factors like size of trust fund, how long it will subsist, and B’s rights
- Ts have more freedom to invest in long-term assets for large commercial trusts than small family trusts
- Ts must act even-handedly between beneficiaries - e.g., in a trust with life and remainder interests, Ts must produce capital and income

(2) diversification = T must consider diversifying trust assets (high/low risk; different asset types) - depending on the trust fund:
- T must act in the financial interest of Bs
- T must balance interests of all Bs (current / future interests; income / capital interests)
- T must exercise powers fairly and honestly
- moral and ethical concerns can be considered where this is fundamental to the trust

Question 4

is a trustee bound to opt for an investment which produces the highest price over one which does not?

Answer 4

trustees have a duty to obtain the best price and maximise estate assets

but there may be circumstances where they are justified with proceeding with a lower offer / investment

example: lower offer is in all cash and can be completed faster than a higher offer funded by a mortgage and involving a related sale

Question 5

what is the duty for trustees to obtain advice? is this always necessary? do trustees have to follow the advice they are given?

Answer 5

• Trustees must obtain and consider proper advice both before investing and while reviewing investments
• proper advice = provided by someone that T reasonably believes is qualified by their ability and experience
• Ts are justified in not seeking advice if they reasonably conclude it is unnecessary (e.g., cost of advice is too high, or T is knowledgable)
• T is not bound to follow the advice if a reasonably prudent trustee would act in the same way BUT cannot ignore it simply because they disagree with it

Question 6

what is the duty of care under statute?
does it differ between lay and professional trustees?
what powers does it apply to?

Answer 6

trustees must exercise such care and skill as is reasonable in all the circumstances

• considers any special knowledge or experience that a specific T holds or held themselves out to hold
• professional trustees have a higher standard of care = requires consideration of any special knowledge or experience that is reasonable to expect of a person acting in that capacity

only applies to = powers of investment, acquiring land, and delegation

Question 7

what is the common law duty of care owed by trustees?

Answer 7

trustees must exercise the standard of diligence and care expected of an ordinary prudent businessperson

Question 8

what is the trustee power to acquire land? what are its limitations?

Answer 8

Ts can acquire freehold or leasehold land in the UK but not overseas (unless trust instrument extends the power)

can be exercised for investment purposes or to buy a land for a B to occupy

if for investment purposes, T must consider standard investment criteria

statutory duty of care applies whether for investment purposes or not

Question 9

what is the trustee power of delegation?
what are the limits of this power? (2)
what is the process and formality to follow? (3)
what are T’s duties when delegating? (4)

Answer 9

T has the power to delegate administrative duties

limits =
- cannot delegate dispositive powers
- cannot delegate to beneficiaries

process =
- delegation must be in writing
- T must write a policy statement which guides the agent on how to exercise their powers
- agreement must contain a term ensuring agent complies with policy statement

duties of T =
- comply with statutory duty of care when selecting agents
- review acts of agent
- consider whether they need to intervene
- intervene when required

Question 10

will a trustee be liable for breaches of an agent they delegated powers to?

Answer 10

trustee is not liable for agent actions

unless the trustee failed to comply with their duty of care when appointing the agent, to review actions, consider intervening, and actually intervening