Trustee Powers and Duties Flashcards
(12 cards)
What are the two main categories of trustee powers and duties?
Administrative — Relating to the management of the trust (e.g. investing, safeguarding property)
Dispositive — Relating to the distribution of trust income and capital to beneficiaries
What powers and duties are included under the Trustee Act 2000?
Power of investment (s 3)
Duty to consider investment criteria (s 4: suitability & diversification)
Duty to take advice (s 5)
Power to acquire land (s 8)
Power to delegate functions (s 11–15)
All exercised subject to the statutory duty of care
What is the standard investment criteria
Suitability – The investment must be suitable in general and in the specific trust context
Diversification – Trustees must consider the need to diversify trust investments based on the fund’s size and purpose
trustee investments?
Trustees must act in the best financial interests of beneficiaries
Trustees’ personal or moral views are irrelevant
Ethical concerns may only be considered if all beneficiaries agree and are of sound mind
What is required when trustees delegate their powers?
Delegation must be in writing
Must include a policy statement
Trustees must review the arrangement and ensure compliance with the duty of care
Cannot delegate discretionary/dispositive powers or delegate to beneficiaries.
What are trustees’ core dispositive duties in relation to capital and income?
Capital: Distribute as soon as it vests or is requested under Saunders v Vautier
Income:
Adults: distribute as it arises
Minors: accumulate unless using power of maintenance
What is the duty of trustees in a life interest trust?
Distribute income to the life tenant as it arises
Hold capital on trust for remainderman
On life tenant’s death, transfer capital to remainderman (unless otherwise directed
What is the statutory power of advancement and when is it available?
trustees may advance capital for the benefit of a beneficiary:
Applies to vested or contingent interests
Available to minors and adults
Can be used up to 100% of presumptive share
Consent needed if another person has a prior interest in capital
How must trustees ensure advancement is properly carried out?
Must check the advancement is for the beneficiary’s benefit
May pay capital to:
The beneficiary (if adult)
A guardian or third party (if minor)
Must monitor use of funds and stop payment if misused
Must bring into account any advance on final distribution
Can trustees advance the full presumptive share of a beneficiary?
Yes, up to 100% for trusts created after 1 October 2014.
Before this date, only 50% was allowed under the statute
What is the statutory power of maintenance and when does it apply?
trustees may use income for the maintenance, education or benefit of a minor with a vested or contingent interest.
Only applies if no one else has a prior interest in the income
Discretionary power — not mandatory
Applies to current and accumulated income
Who should receive income under the power of maintenance?
Not directly to the minor. Trustees should pay:
The parent or guardian, or
Directly to the provider of goods/services (e.g. school)
Trustees must ensure income is used for the child’s benefit
