Trustees Duties Flashcards
Duty of care
Trustees must take “all precautions which an ordinary prudent man of business would take in managing affairs of his own””
Duties when starting out as a trustee
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
Duty to act impartially between beneficiaries
Trustee must act impartially in the interests of each beneficiary.
Trustee must not benefit one beneficiary at the expense of another
Duty to act personally and unanimously
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
What are breaches of the duty to act personally to the trust?
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;
Duty to exercise discretions properly
Beneficiaries cannot compel trustees to exercise discretionary powers. They can intervene if trustees exercise these improperly
How can trustees exercise their duty to exercise discretions properly?
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
Do trustees have to give reasons for their exercise of a power?
No.they do not need to give reasons for their decisions.
Duty to disclose information
Beneficiaries are entitled to see:
- Trust document or will that creates trust
- Trust accounts
- Schedule of trust investments, or other documents that show investments
What are the objectives for investment within a trust?
Consider what beneficiary interests
What circumstnaces
How long will trust last
What is the size of the trust
Tax position
What are the different investment types
Shares
Bonds
Property
Cash-in-bank
What are authorised investments?
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.
What is s 8 TA 2000 for land?
Trustee can acquire land as an investment, if it is in the UK, for either:
Investment
Occupation of beneficiary
Any other reasons
What are the statutory duties when purchasing or reviewing investments?
S 4 TA 2000
- Must be suitable for the trust
- Need for diversification
- Must obtain proper investment advice from someone trustee reaoonsably believes to be qualified to give advice
- Exercise reasonable care and skill in circumstances
What are the non-statutory duties for investments?
Trustees must act impartially between beneficiaires
Trustees must secure the best return for all the Beneficiaires.
Can trustees delegate investment tasks?
Yes, trustees can collectively delegate their investment functions
CANNOT do this to a beneficiary
What must the trustees do if they a re delegating their investment duties?
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.
Who can be a fiduciary?
Someone who has undertaken to act for someone else, and gives rise to a relationship of trust and confidence.
What is the core fiduciary duty
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
When can trustees keep personal profits?
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
What is self-dealing?
Fiduciary breach
If a trustee sells, or purchases property, from the trust.
What is competition with the trust?
Fiduciary duty
Trustee must not set up their own business in competition.
What can happen if trustee breaches self-dealing duty?
Not automatically void, as beneficiaries may decide transaction was a good deal. However, beneficiaries can set aside transaction within a reasonable person of time.
What are the remedies for breach of competition with the trust?
They are liable to account for any profits made by their competing business.
What is remuneration of trustees?
Fiduciary duty breach
Trustees cannot demand payment unless authorised
When are trustees authorised to recieve remuneration for their role?
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.
What are incidental profits?
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)
What is use of information or opportunity?
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.
What are the remedies for a fiduciary breach?
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.
