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Trust Law > Trustees Powers Annd Duties > Flashcards

Trustees Powers Annd Duties Flashcards

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1
Q

What are administrative powers in trust law?

A

Administrative powers are the powers conferred on trustees to manage and invest trust property, often outlined in the trust instrument.

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2
Q

What is the Trustee Act 2000 (TA 2000)?

A

The TA 2000 provides default powers and duties for trustees in the absence of express powers in the trust instrument.

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3
Q

What is the general power of investment under TA 2000?

A

Section 3 TA 2000 allows trustees to make any kind of investment they could make if absolutely entitled to the trust assets.

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4
Q

What must trustees consider when exercising the general power of investment?

A

Trustees must consider the standard investment criteria in s 4 TA 2000 and take advice as per s 5 TA 2000.

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5
Q

What are the standard investment criteria?

A

The standard investment criteria include suitability and diversification of trust investments.

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6
Q

What is the case Cowan v Scargill about?

A

Cowan v Scargill [1985] Ch 270 establishes that trustees must act in the best financial interests of beneficiaries when considering investments.

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7
Q

What are the qualifications to general principles in trustee investment?

A

Trustees may prefer ethical investments if there is a straightforward choice between economically equivalent options.

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8
Q

What is required under s 5 TA 2000 regarding advice?

A

Trustees must obtain and consider ‘proper advice’ before exercising their investment powers.

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9
Q

What is the statutory duty of care for trustees?

A

The statutory duty of care requires trustees to exercise reasonable care and skill in their duties as per s 1 TA 2000.

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10
Q

What is the common law duty of care for trustees?

A

The common law duty of care requires trustees to exercise the diligence and care expected of an ordinary prudent business person.

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11
Q

What is the power to acquire land under TA 2000?

A

Section 8 TA 2000 allows trustees to acquire freehold or leasehold land in the UK for investment or occupation by beneficiaries.

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12
Q

What is the power of delegation under TA 2000?

A

Section 11 TA 2000 permits trustees to delegate powers of investment and land acquisition, but not their distributive obligations.

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13
Q

What are the circumstances in which trustees distribute trust property?

A

Trustees distribute trust property when obligated by the trust terms, directed by beneficiaries, or exercising a dispositive power.

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14
Q

What is the duty to distribute capital?

A

Trustees must distribute capital as per the terms of the trust, ensuring timely transfer to beneficiaries.

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15
Q

What are the obligations regarding income distribution for adult beneficiaries?

A

Trustees must distribute income to adult beneficiaries as it arises, unless the trust instrument states otherwise.

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16
Q

What are the obligations regarding income for minor beneficiaries?

A

Trustees must accumulate income for minor beneficiaries until they turn 18, at which point they must distribute income as it arises.

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17
Q

What happens when a beneficiary reaches the age of 25 in a trust fund?

A

Trustees must transfer the capital and any accumulated income to the beneficiary as soon as possible.

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18
Q

What is the obligation of trustees when holding property on trust for A for life, remainder to B?

A

Trustees must distribute income to A during their lifetime and transfer the trust property to B after A’s death.

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19
Q

What are the obligations of trustees when holding £1,000 for A if they reach 21?

A

Trustees must hold the capital on trust and accumulate income until A reaches 21.

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20
Q

What rights do A and B have regarding the trustee?

A

A and B can exercise their Saunders v Vautier rights to direct the trustee to transfer the property to them or another in their chosen shares. The trustee must comply with this direction.

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21
Q

What are the trustee’s obligations when A is 14 and holds £1,000 for A if they reach 21, or to B if they do not?

A

The trustees must continue to hold the capital on trust and accumulate the income.

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22
Q

How do the trustee’s obligations change when A reaches 18?

A

The trustees must continue to hold the capital on trust but must now distribute the income to A as it arises. A cannot use Saunders v Vautier but can do so with B. The trustees must comply with any joint direction by A and B to transfer the capital.

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23
Q

What happens when A reaches 21 regarding the trustee’s obligations?

A

The trustees must distribute the capital (and accumulated income) to A.

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24
Q

What are the trustee’s obligations when A is 14 and B has just turned 18 with £2,000 held for them in equal shares?

A

A and B both have vested interests. A’s is vested in interest; B’s is vested in possession. The trustees must hold A’s £1,000 until they reach 18 and accumulate the income. The trustee must distribute B’s £1,000 share (plus accumulated income) as soon as possible.

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25
Q

What are the trustee’s obligations when A is 14, B has just turned 21, and C has just turned 18 with £3,000 held for them?

A

The trustees must continue to hold A’s share and accumulate income until A reaches 18, distribute B’s share as soon as possible, and hold C’s share while distributing C’s income as it arises. If C requests their share of the capital, it must be distributed as soon as possible.

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26
Q

What are the dispositive duties of trustees in discretionary trusts?

A

Trustees of discretionary trusts have a duty to exercise their discretion and distribute the trust property to chosen objects within a reasonable time.

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27
Q

What is the ultimate obligation of trustees regarding trust property?

A

Trustees have a duty to distribute trust property in accordance with the trust terms and an ultimate obligation to distribute the capital and bring the trust to an end.

28
Q

When must trustees distribute capital?

A

Trustees must distribute the capital as soon as possible when the duty arises or if directed by beneficiaries exercising their Saunders v Vautier rights.

29
Q

What are the obligations of trustees regarding trust income?

A

Trustees may have an obligation to accumulate trust income or distribute it as it arises. If they must distribute income, they must do so as soon as possible.

30
Q

What must trustees do if they have an obligation to accumulate income?

A

They must add it to the capital and distribute it with the capital when the obligation to do so arises.

31
Q

What are dispositive powers in relation to trustees?

A

Trustees have dispositive powers regarding both capital and income, which can be amended or excluded by the trust instrument.

32
Q

What is the power of maintenance under section 31 of the Trustee Act 1925?

A

It allows trustees to pay income for the maintenance, education, or benefit of a minor beneficiary.

33
Q

To whom does the power of maintenance apply?

A

It applies to both vested and contingent interests of minor beneficiaries, but not if someone else has a prior interest in the income.

34
Q

What is the power of advancement under section 32 of the Trustee Act 1925?

A

It allows trustees to pay capital for the advancement of a beneficiary whose interest has not yet vested in possession.

35
Q

Who can benefit from the power of advancement?

A

Both adult and minor beneficiaries can benefit, and it applies to both vested and contingent interests.

36
Q

What is the maximum capital that can be paid under the power of advancement?

A

Trustees may use the power to pay up to 100% of a beneficiary’s prospective entitlement to the capital.

37
Q

What should trustees consider when exercising the power of advancement?

A

Trustees must ensure that the advancement will benefit the beneficiary and not prejudice other beneficiaries.

38
Q

What is the statutory power of maintenance used for?

A

It is used for the maintenance, education, or benefit of minor beneficiaries.

39
Q

How should trustees pay income to a minor beneficiary?

A

Income should be paid to the child’s parent or legal guardian or directly to the provider of goods or services.

40
Q

What happens to accumulated income when a minor beneficiary turns 18?

A

Any accumulated income not paid out using the power of maintenance must be added to the capital.

41
Q

What is the fiduciary nature of the power of maintenance?

A

Trustees must act in good faith and in the best interests of the minor beneficiary when exercising the power.

42
Q

What is the significance of the case Wilson v Turner (1883)?

A

It illustrates that trustees must not simply pay income to a minor’s parent or guardian without ensuring it benefits the minor.

43
Q

What is the role of consent in exercising the power of advancement?

A

The power may only be exercised with the written consent of beneficiaries with a prior interest.

44
Q

What is a common use of the power of maintenance?

A

Common uses include paying school fees, medical bills, and other necessary expenses for the minor beneficiary.

45
Q

What is the importance of checking the trust instrument?

A

It is crucial to determine the actual powers of the trustees, as statutory powers can be varied or excluded.

46
Q

What should trustees do if they suspect funds are misused?

A

Trustees should ensure that the money is used for the intended purpose and may stop further payments if misused.

47
Q

What happens if a trust was created before 1 October 2014 regarding advancement?

A

Trustees can only advance up to a maximum of 50% of the beneficiary’s prospective share of the capital.

48
Q

What is the power of advancement?

A

The power of advancement allows trustees to pay capital to or for the benefit of a beneficiary before their interest vests in possession.

49
Q

Can trustees use their power of advancement for B?

A

Yes, the trustees can use their power of advancement for B but are under no obligation to do so.

50
Q

Do trustees require A’s consent to use the power of advancement for B?

A

No, they do not require A’s consent as A does not have a prior interest to B.

51
Q

What must trustees be satisfied of when using the power of advancement?

A

Trustees must be satisfied that the payment is for the beneficiary’s benefit.

52
Q

In example 2, what is the amount A asked the trustees for?

A

A asked the trustees for £2,000 to buy a new computer.

53
Q

Is A’s interest in example 2 contingent?

A

Yes, A’s interest is contingent.

54
Q

In example 3, what is the amount B asked the trustees for?

A

B asked the trustees for £5,000 to purchase new equipment for his home gym.

55
Q

What is required for trustees to exercise the power of advancement in favor of B in example 3?

A

Trustees need A’s written consent to exercise the power of advancement in favor of B.

56
Q

In example 4, what is the total trust fund amount held for A and B?

A

The total trust fund amount held for A and B is £20,000.

57
Q

What is the maximum amount the trustees can advance to A in example 4?

A

The trustees can advance up to £10,000 to A.

58
Q

What must trustees do when they make a payment using the power of advancement?

A

Trustees must bring the payment into account when the beneficiary becomes absolutely entitled.

59
Q

How can trustees treat the share advanced to a beneficiary?

A

Trustees can treat the share advanced as a proportionate share of the overall trust value or its strict monetary value.

60
Q

What happens if the payment is treated as A’s proportionate share?

A

If treated as A’s proportionate share, A will no longer be entitled to anything from the trust fund.

61
Q

What is the statutory power of advancement under s 32 TA 1925?

A

Trustees have a statutory power to pay capital to or for the benefit of a beneficiary before their interest vests in possession.

62
Q

Who can the power of advancement be exercised in favor of?

A

The power of advancement can be exercised in favor of any beneficiary, even if their interest is contingent, but requires the consent of beneficiaries with a prior interest.

63
Q

What must payments made under the power of advancement be used for?

A

Payments must be used for the beneficiary’s advancement or benefit.

64
Q

Who can payments be made to under the power of advancement?

A

Payments can be made directly to adult beneficiaries, to the parent or guardian of minor beneficiaries, or directly to the provider of goods or services obtained for the beneficiary.

65
Q

What must trustees check if they pay to the beneficiary or their parent/guardian?

A

Trustees must check that the payment has been used for the correct purpose.

Trust Law (10 decks)

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