Trustees Duties When Running a trust Flashcards
Give an example of when beneficiaries can compel trustees to perform duties.
Under a fixed interest trust, trustee are under duty to distribute property at the right time to the correct beneficiaries.
If they refused to do so, beneficiaries can enforce the duty by obtaining a court order.
When it comes to exercising powers (not duties) what two obligations are there on trustees?
a) trustees must consider from time to time whether to exercise them; and
b) if they do decide to exercise them, they must ensure that they do so properly.
Explain the duty of care trustees are under.
When running a trust, trustee must take ‘all those precautions which an ordinary prudent man of business would take in managing similar affairs of his own’.
This is an objective standard.
Standard may be higher for professional trustees (eg solicitors who are paid to act as trustees will be judged anther usual profession standard).
What things is a newly appointed trustee obligated to consider upon their appointment?
1) Ensure they have been appointed properly;
2) Ascertain what the trust property consists of and take all retainable and proper measures to obtain control of the trust property.
3) Review trust doc and paperwork. this familiarises themselves with the trust and how it works - other trustees must produce papers relating to the administration of the trust.
4) Enquire into the past business of the trust to ensure that there have been no past breaches of trust, and to take the appropriate action to remedy any breaches.
5) Where chattels are held on trust, ensure a proper inventory is drawn up.
If when a trustee is appointed, they notice that the transfer of trust property to a new trustee is outstanding, what use they dod ?
Press the other trustees for that transfer to take place.
Explain the trustee duty to act impartially between beneficiaries.
When faced with a choice between two beneficiaries whose interests seem to conflict, they are under a duty to act impartially in the interests of each beneficiary.
Doesn’t necessarily mean equal treatment, but both should be consulted.
General rule is a trustee must not benefit one beneficiary at the expense of the other.
Explain the trustee duty to act personally and unanimously.
Co-trustees must generally take decisions unanimously (unless trust doc provides otherwise).
If a trustee:
1) leaves matters in hands of others without enquiry;
2) allows trust funds to remain in sole control of co-trustee;
3) fails to watch over and, if necessary, correct conduct of their co-trustees; or
4) fails to take action knowing that co-trustee was committing or about to commit a breach of trust,
then they may be liable to re-compensate loss beneficiaries suffer as a result.
Can trustees allow a professional adviser who isn’t a trustee (eg financial advisor, solicitor, accountant etc) to take decision for them?
No.
They can consult professional advisers but trustees must ultimately make their won decision and be responsible for such.
Explain the duty to exercise discretions properly.
Benrivizries cannot compel trustees to act in a particular way, but they can intervene if trustees exercise powers improperly.
When trustees exercise a power, they must do so:
1) in good faith;
2) rationally;
3) for purpose which it was created;
4) with regard to relevant material matters and without regard to irrelevant ones;
5) with regard to all relevant facts; and
6) with regard to ay legitimate expectation that a beneficiary might have that the power be exercised in a particular way.
Do the trustees need to give reasons for the exercise of a power?
The general rule is no.
A exception is where a beneficiary has a legitimate expectation that discretion will be exercised in their favour. In such a situation trustees may be obliged to give reasons and advance warning if they are thinking of exercising their discretion differently.
Give an example of a situation where trustees would need to give reasons for their decision not to exercise a power.
Trustees have given a capital advance to a beneficiary every year for the past 10 years. In this situation they cannot simply discontinue these payments without warning, and giving that beneficiary the opportunity to persuade them to continue to make such payments.
Which documents are beneficiaries entitled to see upon request?
1) Trust documents or will which created the trust;
2) Trust accounts; and
3) Schedule of trust investments or other documents that show how trust property is invested.
Are trustees allowed to demand documents which record trustees’ deliberations on a discretion or power?
No.
Trustees are not obliged to give reasons for their decisions and beneficiaries cannot circumvent this by demanding documents in which decision are recorded.
Can a beneficiary demand aight of letters of wishes from settlors?
No because again this would give info as to how the trustees are required to exercise their discretion.
What is the one way beneficiaries could obtain sight of docs which illustrate the the reasons for trustees exercise of powers (eg trust meeting minutes or letter of wishes from settlor)?
They would have to apply for a court order.
Court will start with the presumption that such docs should not be disclosed, unless it is in the interests of the sound administration of the trust (eg there is good evidence the trustees may have committed a breach of trust).
In what situations would the court refuse disclosure of confidential trust documents to beneficiaries?
IT would cause family members to fall out;
Reveal confidential info about finances; or
Reveal info about health of individual beneficiaries.
