Trustees: Administrative Powers and Duties Flashcards
Which of the following is required under s 4 Trustee Act 2000 when trustees are exercising their power of investment?
A. Trustees must consider suitability and diversification
B. Trustees must obtain written permission from the court
C. Trustees must invest only in government bonds
D. Trustees must consult the beneficiaries
A. Trustees must consider suitability and diversification
Explanation: Under s 4 TA 2000, trustees must regularly review investments and have regard to the standard investment criteria: the suitability of the investment and the need for diversification.
Ben is a trustee. He invests trust money into a start-up company based on a friend’s recommendation without seeking professional advice. The investment fails. Which duty has Ben most likely breached?
A. Fiduciary duty to avoid conflict
B. Duty to obtain proper advice
C. Duty to diversify
D. Duty to distribute equally
B. Duty to obtain proper advice
Explanation: Trustees are under a statutory duty to seek investment advice under s 5 TA 2000 unless it is inappropriate to do so. Failing to seek advice before a risky investment is a breach.
When do trustees not need to obtain investment advice under s 5 Trustee Act 2000?
A. If the investment involves land
B. If the investment is high-risk
C. If the trustee is a lay person
D. If it is unreasonable or inappropriate to do so
D. If it is unreasonable or inappropriate to do so
Explanation: s 5 TA 2000 requires trustees to obtain proper advice unless they reasonably conclude it is unnecessary or inappropriate based on the circumstances (e.g. trivial investment or trustee expertise).
The trust property includes a house. The trustee wishes to buy it for himself at full market value. Which of the following best describes the trustee’s position?
A. This is acceptable if he pays fair value
B. It is allowed if other trustees agree
C. It breaches the no-conflict rule
D. It is lawful if the trust instrument is silent
C. It breaches the no-conflict rule
Explanation: Trustees must not place themselves in a position of conflict, even if they offer fair value. Purchasing trust assets personally is self-dealing and is only allowed with court approval or informed beneficiary consent.
A professional trustee has delegated investment decisions to a financial advisor but failed to provide a written policy statement. What consequence may arise?
A. The trustee has complied with s 11 TA 2000
B. The advisor becomes personally liable
C. The delegation is valid under s 8 TA 2000
D. The trustee may be liable for any resulting loss
D. The trustee may be liable for any resulting loss
Explanation: Under s 15 TA 2000, trustees must provide a written policy statement when delegating. Failure to do so means the trustee may be liable for poor investment performance.
A trust instrument gives trustees power to invest, but expressly removes the statutory duty of care under s 1 TA 2000. What is the effect?
A. Trustees must still act prudently under common law
B. Trustees can invest in any way they choose
C. The investment power is void
D. Trustees must obtain court permission for investments
A. Trustees must still act prudently under common law
Explanation: Even if the statutory duty of care is excluded, the common law duty of prudence still applies. Trustees must act as a prudent businessperson managing someone else’s money.
Which of the following assets can trustees acquire under s 8 Trustee Act 2000?
A. Overseas commercial property
B. UK freehold or leasehold land
C. Cryptocurrency and digital assets
D. Shares in non-profit organisations
B. UK freehold or leasehold land
Explanation: s 8 TA 2000 allows trustees to acquire land in England and Wales either for investment, for beneficiary occupation, or for other trust purposes.
Three trustees want to delegate their investment decisions to a financial firm. What must they do to comply with s 15 Trustee Act 2000?
A. Publish a notice in the Gazette
B. Notify the beneficiaries
C. Provide a written policy statement
D. Record the decision in the estate accounts
C. Provide a written policy statement
Explanation: Trustees delegating functions must do so in writing and supply a written policy statement to the agent. This outlines objectives and limits of the delegation.
