Trustees Duties

Question 1

Duty of care

Answer 1

Trustees must take “all precautions which an ordinary prudent man of business would take in managing affairs of his own””

Question 2

Duties when starting out as a trustee

Answer 2

Properly appointed
Ascertain what trust property is and take all measure to obtain control
Review trust document and paperwork
Enquire about past business, to ensure no breaches

Question 3

Duty to act impartially between beneficiaries

Answer 3

Trustee must act impartially in the interests of each beneficiary.

Trustee must not benefit one beneficiary at the expense of another

Question 4

Duty to act personally and unanimously

Answer 4

Each co-trustee has a duty to take all reasonable and property measures to take control of the trust property.

Must generally take decisions unanimously.

Must act personally, personally ACTIVE in running the trust. CANNOT leave all matters to another co-trustee without enquiry

Question 5

What are breaches of the duty to act personally to the trust?

Answer 5

leaves matters in the hands of a co- trustee without enquiry;
(b) allows trust funds to remain in the sole control of a co- trustee;
(c) fails to watch over and, if necessary, correct the conduct of their co- trustees; or
(d) fails to take action knowing that a co- trustee was committing, or about to commit, a
breach of trust;

Question 6

Duty to exercise discretions properly

Answer 6

Beneficiaries cannot compel trustees to exercise discretionary powers. They can intervene if trustees exercise these improperly

Question 7

How can trustees exercise their duty to exercise discretions properly?

Answer 7

a) in good faith;
(b) rationally;
(c) for the purpose for which it was created;
(d) with regard to relevant material matters and without regard to irrelevant ones;
(e) with regard to all relevant facts; and
(f) with regard to any legitimate expectation that a beneficiary might have that the power be
exercised in a particular way

Question 8

Do trustees have to give reasons for their exercise of a power?

Answer 8

No.they do not need to give reasons for their decisions.

Question 9

Duty to disclose information

Answer 9

Beneficiaries are entitled to see:

1. Trust document or will that creates trust
2. Trust accounts
3. Schedule of trust investments, or other documents that show investments

Question 10

What are the objectives for investment within a trust?

Answer 10

Consider what beneficiary interests
What circumstnaces
How long will trust last
What is the size of the trust
Tax position

Question 11

What are the different investment types

Answer 11

Shares

Bonds

Property

Cash-in-bank

Question 12

What are authorised investments?

Answer 12

S 3 and 8 of TA 2000

Sets out what investments trustees can purchase on behalf of trust.

Trustee can make any investment they could if tehy were entitled to the assets, save for investments of land.

Question 13

What is s 8 TA 2000 for land?

Answer 13

Trustee can acquire land as an investment, if it is in the UK, for either:

Investment
Occupation of beneficiary
Any other reasons

Question 14

What are the statutory duties when purchasing or reviewing investments?

Answer 14

S 4 TA 2000

1. Must be suitable for the trust
2. Need for diversification
3. Must obtain proper investment advice from someone trustee reaoonsably believes to be qualified to give advice
4. Exercise reasonable care and skill in circumstances

Question 15

What are the non-statutory duties for investments?

Answer 15

Trustees must act impartially between beneficiaires

Trustees must secure the best return for all the Beneficiaires.

Question 16

Can trustees delegate investment tasks?

Answer 16

Yes, trustees can collectively delegate their investment functions

CANNOT do this to a beneficiary

Question 17

What must the trustees do if they a re delegating their investment duties?

Answer 17

Prepare written statement - policy statement
Written agreement, agent is retained
Agent must comply with same statutory and non-statutory duties
Trustees must REGULARLY review the arrangements
Trustee must select a suitably qualified person.

Question 18

Who can be a fiduciary?

Answer 18

Someone who has undertaken to act for someone else, and gives rise to a relationship of trust and confidence.

Question 19

What is the core fiduciary duty

Answer 19

Must not put themselves in a position where their own interests conflict with the interests of the trust

Must not many an unauthorised personal profit from their position

Question 20

When can trustees keep personal profits?

Answer 20

If authorised by the trust
If all beneficiaries are over 18 and have consented if known all facts
Authorised by a court order or statutory provision

Question 21

What is self-dealing?

Answer 21

Fiduciary breach

If a trustee sells, or purchases property, from the trust.

Question 22

What is competition with the trust?

Answer 22

Fiduciary duty

Trustee must not set up their own business in competition.

Question 23

What can happen if trustee breaches self-dealing duty?

Answer 23

Not automatically void, as beneficiaries may decide transaction was a good deal. However, beneficiaries can set aside transaction within a reasonable person of time.

Question 24

What are the remedies for breach of competition with the trust?

Answer 24

They are liable to account for any profits made by their competing business.

Question 25

What is remuneration of trustees?

Answer 25

Fiduciary duty breach

Trustees cannot demand payment unless authorised

Question 26

When are trustees authorised to recieve remuneration for their role?

Answer 26

Express in trust deed - chargin clause

Beneficiaries consenting, if all 18 or above and can agree.

Court order

It trust deed makes a provision about remuneration: if a trustee acts in a professional capacity and who is not a sole trustee, and where the other trustees have agreed in writing.

Question 27

What are incidental profits?

Answer 27

Fiduciary duty breach

If the trustee receives commission, or a directors salary - if put in that position due to trust powers (eg, 50% of shares etc)

Question 28

What is use of information or opportunity?

Answer 28

Fiduciary duty breach

Trustee is liable to account for any profits they receive where they recieve that profit by exploiting an opportunity that belonged to the trust.

Question 29

What are the remedies for a fiduciary breach?

Answer 29

Personal claim or proprietary claim

Personal claim: unauthorised profit. Surrender their personal profit

Proprietary claim: seek to recover property owned by the trustee that represents the personal profit they received.