Trusts 6 Flashcards
In relation to appointment of trustees, what power has each of the following:* Settlor* Court* Continuing/Retiring Trustees* PRs of a deceased trustee* Beneficiaries
Settlor* Usually appoints trustees in trust instrument* Once trust created, Settlor has no power to appoint trustees unless that power is reserved in the trust instrumentCourt* Can appoint trustees under either the court’s inherent jurisdiction or statute (original or replacement)Continuing/retiring trustees* Usually have the power to appoint PRs of a deceased trustee* have the power to appoint only when a sole trustee diesBeneficiaries * No power to appoint trustee unless all are of full age and together absolutely entitled
How are the original trustees appointed?
- The trustees are usually appointed by the settlor in the trust instrument. * If not, the court can appoint trustees under either the court’s inherent jurisdiction or statute.* A trustee must have notice of the trust and expressly or impliedly accept the office of trustee. * They are not obliged to accept the trust, and before acceptance, a trustee can disclaim or refuse appointment for any reason. However, a trustee cannot accept a trust in part and disclaim it in part.
What are the 5 rules in relation to the number of trustees?
- No maximum for personalty* Maximum 4 for land* Sole trustee may act unless selling trust land when 2 or a trust corporation is required to give valid receipt* No additional trustees if there are 4 already* May increase numbers if trustee is being replaced
Once the trust has been created, can the Settlor appoint additional trustees?
No, unless there is an express provision in the trust instrument. In the absence of special provisions in the trust instrument, the statutory rules on appointment, retirement, and removal of trustees apply.
Who has the power to appoint additional trustees and what are the limits on this power?
- Power: Unless a trustee is a trust corporation, a person may be designated in the trust as having the power to appoint additional trustees; otherwise the existing trustees have this power.* Limit: Power may not be used to increase the number of trustees to more than four, even if the trust property does not include land.
Where additional trustees are appointed, what is required to vest land and chattels in the new trustees?
An appointment by deed (note, appointments are often made by deed but it is not a strict requirement)
A and B are trustees holding a large portfolio of shares on discretionary trusts for a defined group of beneficaries. They wish to appoint C, an accountant, to share their duties. The trust instrument does not include any special administrative powers. Are they permitted to appoint C?
Yes A and B may together appoint C as a third trustee. (Note that, as a professional trustee, C will have statutory power to charge reasonable remuneration for her services)
In which 6 situations may replacement trustees be appointed?
One or more new trustees may be appointed to replace a trustee who: * Dies* Refuses to act* Remains outside the UK for a continuous period exceeding 12 months* Is unfit to act (e.g. by committing a breach of trust or by being a bankrupt)* Is incapable of acting (e.g. by mental incapacity or infirmity) or* Desires to be discharged.
What is the hierarchy that applies to who may appoint a replacement trustee?
- The person named in the trust instrument (if any) * The surviving or continuing trustees. A retiring trustee should be a party to an appointment by trustees (except if removed against their will).* The PRs of the last surviving trustee * The court.
Is it necessary to replace outgoing trustees?
- The appointors are not obliged to replace all outgoing trustees, but they may do so. * They may also use this power to increase the number of trustees, subject to the maximum number of four trustees for a trust of land.
What formalities apply to the appointment of a replacement trustee?
In writing but need not be made by deed. Even though not necessary, a deed is commonly used, as it will operate to vest legal title to land and chattels in the new trustees. Stock transfer forms and registration requirements will also need to be fulfilled.
T and V are trustees, holding shares in various companies on trust for T’s children and grandchildren. V wishes to retire. The trust instrument does not give any special powers to appoint trustees. What must T and V do to appoint a new trustee?
T and V may together appoint one or more new trustees to replace V. * They will need to sign transfer forms for each of the shareholdings to transfer title to T and the new trustee(s), and * register the transfer with the relevant companies.
S and J are trustees, holding land on trust for B, who is 10 years old. J dies. The trust instrument does not give any special powers to appoint trustees. What are S’s options in relation to appointing a replacement trustee?
- S may appoint one or more trustees to replace J, although he may not increase the number of trustees to more than four, since the trust includes land. If he makes the appointment by deed, the deed will operate to vest the title to the land in S and the new trustee(s). * Alternatively, S may continue acting as trustee alone, but should he decide to sell the land, a second trustee will be required to give a valid receipt for the proceeds of sale.
When will beneficiaries have the power to control the appointment of trustees?
- There is no person nominated in the trust instrument to appoint new trustees* The beneficiaries under the trust are of full age and capacity, and taken together, they are absolutely entitled to the trust property (note that in these circumstances the beneficiaries could, if they wished, agree to end the trust and divide the trust property between them) and * The beneficiaries act unanimously. If these requirements are satisfied, the beneficiaries may, by written instruction, order one or more of the existing trustees to retire and order the existing trustees to appoint a new trustee or trustees of the beneficaries’ choice.
Trustees are holding property on trust for L for life with remainder to R. The trust instrument does not give any special powers to appoint trustees. Both L and R are over 18 and of sound mind. Taken together, L and R own the whole equitable interest. Are L and R capable of removing the existing trustees and appointing new ones?
Yes, they may direct the existing trustees to retire and appoint new trustees of their choice. Alternatively, L and R could agree together to end the trust under the rule in Saunders and Vautier. They could instruct the trustees to distribute the trust property to them in whatever proportions they might agree.
