What duties govern their investments? (Trustees’ duty to invest- FS Flashcards
(10 cards)
What statutory duty governs the standard of care trustees must apply when investing trust property?
Under Section 1 of the Trustee Act 2000, trustees must exercise such care and skill as is reasonable, considering their knowledge, experience, and whether they are acting professionally.
What are the two elements of the standard investment criteria that trustees must consider under Section 4 of the Trustee Act 2000?
Trustees must consider the suitability of investments and the need for diversification, unless it’s inappropriate given the nature or size of the trust.
Are trustees required to diversify investments in all cases?
No. Trustees must simply have regard to the need for diversification. If diversification is not possible or practical, no breach occurs if the duty is still properly considered.
What does Section 5 of the Trustee Act 2000 require trustees to do before making investment decisions?
Trustees must obtain and consider proper advice, unless it would be unreasonable or unnecessary to do so.
Can trustees rely completely on professional investment advice without evaluating it?
No. Trustees retain the duty to act personally, meaning they must assess and decide based on the advice—they cannot delegate the decision-making responsibility.
What non-statutory duties apply to trustees when making investments?
Trustees must still follow the general duties to:
- Act fairly between beneficiaries
- Act personally
- Act unanimously
These shape the integrity and balance of investment decisions.
What is the significance of the duty to act fairly in investment decisions?
Trustees must avoid favouring one beneficiary class (e.g., life tenants) over another (e.g., remaindermen) and instead aim for a balanced return across interests.
How did the case of Cowan v Scargill clarify trustees’ investment duties?
It held that trustees must prioritise financial returns and ignore personal moral beliefs, unless doing so conflicts with a specific instruction or beneficiaries’ best interests.
When can trustees consider ethical or moral concerns in investment decisions?
If the ethical option yields comparable returns, or where beneficiaries strongly oppose certain investments, or the trust has a charitable purpose incompatible with certain investments.
What must a trustee do if the settlor expressly prohibits investment in a certain type of company?
The trustee must follow the settlor’s instructions in the trust instrument and avoid investments that violate those terms, regardless of potential financial return.
