Trustees’ duties when running a trust Flashcards
Differences between powers and duties
Beneficiaries can compel trustees to perform duties.
BUT beneficiaries have very little control over the exercise pf powers.
Most decisions that trustees take in the running of a trust involve the exercise of powers. When it comes to these powers:
a) trustees must consider from time-to-time whether to exercise them; and
b) if they to decide to exercise them, they must ensure that they do so properly.
However, so long as the trustees meet these requirements, beneficiaries have no rights of complaint.
Duty of care
When running a trust, a trustee must take ‘all those precautions which an ordinary prudent man of business would take in managing similar affairs of his own’
Duties when starting out as trustee
A trustee newly appointed to office must:
a) ensure that they have been properly appointed;
b) ascertain what the trust property consists of and take all reaonable and proper measures to obtain control of the trust property - if the transfer of trust property to the new trustee is outstanding, the new trustee must press for that transfer to take place;
c) review the trust document and associated paperwork to familiarise themselves with the trust and how it works;
d) enquire into the past business of the trust to ensure that there have been no past breaches of trust; and
e) where there are chattels held on trust, ensure that a proper inventory us drawn up.
Duty to act fairly between beneficiaries
A trustee must not benefit one beneficiary at the expence of another and may find themselves in breach of trust if they continualy prefer the interests of obe beneficiary over the other.
Duty to act personally and unanimously
Co-trustees must take decisions unanimously.
Trustees must act personally. If a trustee:
a) 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;
this passive trustee may be liable to make good any loss that the beneficiary suffer.
Whilst trustees can take advice from experts- legal, financial or otherwise- they cannot allow the experts to take decisions for them
Duty to exercise discretions properly
Whilst beneficiaries cannot compel trustees to exercise discretionary powers in a particular way, they can intervene if the trustees exercise those powers improperly. Having decided to exercise a power, trustees must exercise that power:
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
Reasons for the exercise of a power
Trustees do not generallt need to give reasons.
BUT. Where a particular beneficiary has a legitimate expectation that a discretion will be exercised in their favour, the trustees may be obliged to give reasons and advance warning if they are thinking of exercising their discretion differently.
Disclosure of information
Beneficiaries are entitled to see the following documents:
a) the trust document or will that created the trust;
b) the trust accounts; and
c) a schedule of trust investments ot other documents that show how trust property is invested.
