Duties and powers of trustees Flashcards
How would land be held in a trust?
- Must be at least joint tenancy(4 max), with trustees registered as owners of the land
- must be 2 trustees unless it’s a trust corporation.
How are trustees changed?
-Through listing an appointer
- no other trustee, then through the deceased trustee’s legal representatives
- Retirement: may have provisions: can’t retire until there’s a new trustee
- Retirement, long as there’s at least 2 other trustees, can remove themselves without replacement.
- court order
-no appointer and all beneficiaries agree
What happens if a trustee breaches fiduciary responsibility?
- In cases of a breach of trust, all trustees, regardless of who was responsible, are jointly and severally liable for any losses to the trust as a result of the breach - unless trust deed exempts them (except in the cases of fraud)
What are ways trustees can have remuneration? (Compensation)
-Trust deed has provision in the trust deed entitling the trustee to receive payment out of the trust funds
-the trustee is a trust corporation or is acting in a professional capacity
-Payment level should be in the stated in trust deed or what would be redeemed as ‘reasonable’
Any trustee is entitled to be reimbursed for expenses properly incurred
Kinds of trustee delegate powers?
- Individual delegation: a trustee is unable to act for a period of time and delegates powers to another
- Collective delegation is where the trustees agree to delegate certain functions to an attorney, eg by appointing an investment manager
- A power of attorney for 12 months. Could be a trust corp.
What kind of investment powers do trustees have?
- If trust deed does not say, then they are given general investment powers. Be able to invest as if it was their money
- Be suitable and be diversified.
- Part II section 5 Act: requires trustees to obtain/consider ‘proper’ advice
- The Act contains an exemption from the requirement to seek advice if ‘reasonably concludes’ that it is unnecessary or inappropriate to do so
-Can delegate investment powers to a 3rd party(discretionary portfolio manager) - in writing, contain guidelines.
On what occasion should there be a replace trustee?
-trustee has died;
-trustee wishes to remain outside the UK for more than a year;
-trustee wants to be discharged from all/any of their powers;
-trustee refuses to act;
-a trustee is no longer capable of acting or is unfit to do so;
-a trustee is an infant (minor)
What are general duties of the trustees?
General duties of trustees:
* Understand the terms of the trust as set out in the trust deed. (1)
* Comply with HMRC taxation requirements. (1)
* Act in accordance with the requirements of the trust deed. (1)
* Act in accordance with trust law. (1)
* Protect trust property for the benefit of the beneficiaries and ensure assets are safeguarded. (1)
* Act impartially between beneficiaries. (1)
* Maintain accounts. (1)
* Avoid any conflicts of interest that may arise. (1)
What is the trustee act of 2000?
The Trustee Act 2000:
* Imposes a statutory duty of care on trustees. (1)
* A trustee must exercise such care and skill as is reasonable in the
circumstances (1) with regard to any special knowledge or experience that the trustee has or claims to have, or if they are a professional trustee, any special knowledge or experience that is reasonable to expect of a person acting in the course of that kind of business. (1 mark for either part)
* The Act requires that a trustee must regularly review trust investments (1) and consider whether, given standard investment criteria, they should be varied.
Deed of Disclaimer ?
An individual who does not want to benefit from an estate can refuse their interest in it completely and disclaim it, provided that they have not accepted any benefit from it before disclaiming it. However, if they disclaim it, they have no control over who should receive the benefit in their place.
They must disclaim the whole interest, not just part of it (unless the Will specifically allows for partial disclaimers).
Deed of Variation?
A Deed of Variation is a document that can be prepared for a beneficiary of a deceased person’s estate that allows them to give up their entitlements under the deceased’s Will or the intestacy rules in favour of other individuals.
It can apply to anything in the estate such as land, cash, a share in the residuary estate or a beneficial interest in a trust.
A Deed of Variation works by allowing the beneficiary to rearrange or redirect the interest that came to them originally from the deceased’s estate. In effect, the beneficiary is transferring to another beneficiary some or all of the interest they have inherited. This transfer is usually made by way of a gift, but it can also be by exchanging respective interests in the estate or by selling an interest.
Rental Allowance?
You can claim the property allowance and get up to £1,000 a year tax-free property income.
If you claim the property allowance you cannot claim a deduction for your expenses.
