Trustee powers and duties

What legal title does a trustee hold?

A trustee holds legal title to the trust property under the common law.

What is the core role of a trustee?

To hold property for the benefit of others.

What is the irreducible core of trusteeship?

The general duty to act honestly and in good faith.

How are a trustee’s more specific obligations determined?

They depend on the terms and circumstances of the particular trust.

What rights and powers does a trustee have over trust property?

A trustee has the rights and powers of a legal owner but must exercise them for the beneficiaries.

What type of duties does a trustee owe to beneficiaries?

Equitable duties enforceable personally against the trustee.

Is a person named as trustee required to accept the office?

A person may refuse the appointment by disclaiming the trusteeship.

What is disclaimer of trusteeship?

Refusal by a person named as trustee to accept the office.

Can a trust fail merely because no appointed trustee is willing to act?

Equity does not allow a trust to fail for want of a trustee.

Why is it good practice to appoint multiple trustees?

Trusteeship is a joint office and multiple trustees provide shared oversight and administration.

Must every trustee take an active role in the trust?

All trustees should participate actively, and failure to do so may result in liability for breach.

Can trustees have broad powers without enforceable duties?

A trust cannot exist where the trustees have no enforceable obligations.

Who determines the extent of trustees’ powers and duties?

The settlor may determine them through the trust instrument, subject to the irreducible core of trusteeship.

How are trustees liable where several of them commit a breach?

All trustees in breach are jointly and severally liable.

What does joint and several liability mean for trustees?

A claimant may recover the full amount from any one or more of the trustees liable for the breach.

How do express trusts arise?

The trust obligation is intentionally imposed on the trustee.

Are voluntary trustees normally paid?

Voluntary trustees are typically unpaid but may recover expenses under section 31 of the Trustee Act 2000.

Which provision allows voluntary trustees to recover expenses?

Section 31 of the Trustee Act 2000.

Are professional trustees entitled to remuneration?

Professional trustees are entitled to payment under section 29 of the Trustee Act 2000.

Which provision governs professional trustees’ remuneration?

Section 29 of the Trustee Act 2000.

What standard of care applies to professional trustees?

They are held to a higher standard reflecting their professional knowledge and experience.

Who commonly acts as trustee of testamentary and family trusts?

Lay trustees who are ordinarily unpaid.

Who commonly acts as trustee of commercial trusts?

Skilled or professional trustees who are often paid.

What role do trustees commonly perform in a small charity?

They may take a direct role in running the charity.

What role do trustees commonly perform in a large charity?

They usually perform a strategic and supervisory role while employees handle operational work.

What is a charity trustee responsible for?

Ensuring that the charity complies with charity law and its statutory obligations.

Are charity trustees necessarily professionals?

They are often lay trustees but may possess experience relevant to the charity’s activities.

What obligations does a trustee of a bare trust have?

Very limited obligations concerning holding and transferring the property as directed.

Can bare trusts arise in both family and commercial contexts?

Bare trusts may be used in either context.

Do resulting and constructive trusts arise from an express intention to create a trust?

They arise by operation of law and may arise despite a contrary expressed intention.

What is the principal role of resulting and constructive trusts?

To recognise proprietary interests and correct failures, wrongs or unfairness.

Do resulting and constructive trustees necessarily have the same obligations as express trustees?

Their obligations may be more limited because the proprietary component is central.

How do statutory trusts arise?

They arise automatically under a statutory rule.

What type of obligations do statutory trusts commonly impose?

Limited trustee obligations, with the proprietary effect of the trust being central.

What are the main sources of trustee powers and duties?

The trust instrument, statute and common law.

What should be consulted first to identify a trustee’s powers and duties?

The trust instrument, such as the deed or will.

What may the trust instrument do to statutory trustee powers?

It may supplement, modify or exclude default statutory rules.

Which statutes provide important default trustee rules?

The Trustee Act 1925 and the Trustee Act 2000.

What is the custodial nature of trusteeship?

Trustees must safeguard the property while it is held on trust.

What financial objectives commonly accompany trustees’ custodial role?

Ensuring that the trust fund produces income and capital growth.

How are trustees’ administrative powers controlled?

Broad administrative powers are limited by associated duties.

What do fiduciary duties principally identify?

Conduct that a fiduciary, including a trustee, must not engage in.

What is the distinction between a trustee’s power and duty?

A power concerns what the trustee may do, while a duty concerns what the trustee must do.

What is a trustee’s primary duty?

To comply with the terms of the trust.

What is the general statutory duty of care under the Trustee Act 2000?

Trustees must exercise relevant administrative powers with the care and skill prescribed by section 1.

Which provision imposes the general statutory duty of care?

Section 1 of the Trustee Act 2000.

Can the statutory duty of care be altered by the trust instrument?

It may be restricted, excluded or extended where Schedule 1 of the Trustee Act 2000 permits.

How does section 1(1)(a) assess a trustee’s personal expertise?

It takes account of special knowledge or experience the trustee has or claims to have.

How does section 1(1)(b) assess a professional trustee?

It takes account of the knowledge and experience reasonably expected of a person acting professionally.

Why is the statutory standard higher for a professional trustee?

More knowledge and experience can reasonably be expected from someone acting in a professional capacity.

What is the common-law standard of care for trustees?

The diligence and care expected of an ordinary prudent businessperson.

How does the common-law standard relate to the statutory standard?

They are generally treated as imposing substantially the same standard, so case law assists in applying the statute.

What are administrative trustee powers?

Powers concerning the management of trust property while it remains in the trust.

Do administrative powers alter beneficiaries’ beneficial interests?

They manage the property without changing the beneficial interests created by the trust.

Which provision gives trustees a general power of investment?

Section 3 of the Trustee Act 2000.

What is the purpose of the trustee’s investment power?

To produce income and capital growth for the trust.

How broad is the statutory power of investment?

A trustee may make any kind of investment as though absolutely entitled to the trust assets.

What must trustees consider when making or reviewing investments?

The standard investment criteria under section 4 of the Trustee Act 2000.

Which provision contains the standard investment criteria?

Section 4 of the Trustee Act 2000.

What are the two aspects of suitability under section 4(3)(a)?

General suitability of the type of investment and specific suitability of the particular investment.

What is general suitability of an investment?

Whether the proposed category or kind of investment is appropriate for the trust.

What is specific suitability of an investment?

Whether the individual investment under consideration is appropriate for the trust.

What factors may affect how much investment freedom trustees possess?

The size of the fund and the period for which the property will be invested.

Why may a large, long-term commercial trust have greater investment freedom?

Its size and duration may allow a broader range of investments and risk management.

When may non-financial considerations have greater relevance to investment decisions?

In charitable trusts, where investments may need to accord with the charity’s wider aims.

What did Cowan v Scargill establish about beneficiaries’ best interests?

Cowan v Scargill treated beneficiaries’ best interests primarily as their best financial interests.

Whose financial interests must investment trustees balance?

The interests of all present and future beneficiaries.

How may trustees balance income and capital beneficiaries?

They should consider both present income generation and long-term capital growth.

Can trustees base investment decisions on their personal opinions?

Their personal views are irrelevant and must not become an ulterior purpose.

When may trustees choose an ethical investment?

They may prefer an ethical investment where it is economically equivalent to the alternative.

Can trustees consider beneficiaries’ ethical views?

Trustees may take the beneficiaries’ ethical views into account.

May trustees disregard investment advice merely because they disagree with it?

Advice may be rejected only where a reasonably prudent trustee would also disregard it.

What is diversification under section 4(3)(b)?

Spreading investments across different assets and levels of risk.

What factors determine the required level of diversification?

The size and nature of the trust fund.

How should trustees assess an investment portfolio?

They must consider the overall portfolio rather than examining each investment in isolation.

What may a diversified trust portfolio contain?

A mixture of higher- and lower-risk investments across different asset types.

What duty to obtain advice applies before investing?

Trustees must obtain proper advice under section 5 of the Trustee Act 2000, subject to an exception.

Which provision governs investment advice?

Section 5 of the Trustee Act 2000.

What is proper advice under section 5(4)?

Advice from a person reasonably believed to be qualified through ability and practical experience relevant to the investment.

When may trustees decide that investment advice is unnecessary?

Where they reasonably conclude that advice is unnecessary in all the circumstances.

Which provision creates the exception to the duty to obtain advice?

Section 5(3) of the Trustee Act 2000.

When might the cost of advice justify not obtaining it?

Where the cost of advice would outweigh its likely benefit to the trust.

Can a trustee’s own knowledge justify not seeking investment advice?

Sufficient relevant knowledge may make outside advice reasonably unnecessary.

Would expertise as a property lawyer necessarily justify investing £50,000 in company shares without advice?

Property-law expertise would not necessarily provide sufficient investment expertise for that decision.

Do trustees have an ongoing duty regarding existing investments?

They must regularly review the trust’s investments.

Which provision permits trustees to acquire land?

Section 8 of the Trustee Act 2000.

What land may trustees acquire under section 8?

Freehold or leasehold land in the United Kingdom.

For what purposes may trustees acquire UK land?

For investment or another trust purpose, including occupation by a beneficiary.

May trustees acquire land outside the United Kingdom under section 8?

Acquisition of land outside the United Kingdom would be a breach of trust.

What requirements apply when trustees acquire land as an investment?

They must consider the standard investment criteria and obtain appropriate advice under sections 4 and 5.

Does the statutory duty of care apply where land is acquired for occupation rather than investment?

The duty of care applies to every exercise of the power to acquire land.

Which provision gives trustees a power of delegation?

Section 11 of the Trustee Act 2000.

Why might a trustee delegate a function temporarily?

The trustee may be unable to discharge their duties for a limited period.

Why might a trustee delegate a specialist function?

The trustee may lack the necessary expertise to perform it properly.

Can trustees delegate distributive obligations?

Decisions concerning distribution of trust property cannot be delegated.

Can trustees delegate investment functions?

They may delegate the power of investment.

Can trustees delegate the power to acquire land?

The power to acquire land may be delegated.

Which provision restricts who may act as a trustee’s agent?

Section 12 of the Trustee Act 2000.

Can a trustee delegate a function to a beneficiary who is also a trustee?

Decisions cannot be delegated to beneficiaries even where they also act as trustees.

How must investment functions be delegated?

By a written agreement under section 15 of the Trustee Act 2000.