Explain the concept of a trust and analyse the powers commonly exercised by trustees in the administration of trust structures. (25 marks)

what is a beneficiary?

a person entitled to benefit from a trust or who may receive distributions under trustee discretion

what is the trustee’s main duty towards beneficiaries?

to hold and administer trust assets in the best interests of all beneficiaries according to the trust deed and trust law

what standard of behaviour must trustees follow when dealing with beneficiaries?

trustees must act:

• fairly

• impartially

• prudently

• honestly

why are regular trust review important?

to ensure distributions and administration continue to meet beneficiary needs and trust objectives

what should trustees consider before making distributions?

whether the request:

• complies with the trust deed

• benefits the beneficiary

• is reasonable and not frivolous

how may trustees assist younger beneficiaries?

by paying distributions to:

• parents

• guardians

• schools

• universities

what is certainty of objects?

beneficiaries must be identifiable for a trust to be valid

what is require in a fixed trust regarding beneficiaries?

all beneficiaries must be specifically identifiable

what is the beneficiary test in a discretionary trust?

it must be possible to determine whether someone falls within the class of beneficiaries

what can beneficiaries do if trustees breach their duties?

bring legal action for breach of trust

what rights do beneficiaries have?

rights include:

• fair treatment

• proper administration

• requesting distributions

• receiving accounts

• legal actions against trustees

what is a beneficiary’s equitable interest?

a proprietary interest in trust assets recognised in equity

can beneficiaries inspect all trust documents?

no, they usually cannot inspect:

• trustee deliberations

• reasons for discretionary decisions

• all internal documents

what is the rule in Saunders V Vautier?

beneficiaries can terminate a trust if:

• all are sui juris

• all are absolutely entitle

• all agree

can beneficiaries force trustees to exercise discretion in a certain way?

no, but beneficiaries may collectively approve trust variations

what is a blind trust?

a trust where beneficiaries do not know how trust assets are invested or managed

why are blind trusts used?

to:

• maintain confidentiality

• avoid conflicts of interest

• preserve anonymity

can beneficiaries of a blind trust direct investments?

no, trustees have full descretion

what is a purpose trust?

a trust established for a specific purpose rathe than identifiable beneficiaries

what are common uses of purpose trusts?

• tax planning

• estate planning

• corporate restructuring

what requirement must a purpose trust satisfy?

the purpose must be:

• lawful

• certain

• not immoral

• not against public policy

what is the role of an enforcer in a purpose trust?

to supervise trustees and ensure the trust purpose is carried out

can trustee also act as enforcer?

no

what is the class closing rule?

a rule determining when membership of a beneficiary class becomes fixed

why is the class closing rule important?

it determines who is entitle to benefit from the trust

when may trustees need to disclose the existence of a trust?

where failure to disclose would unfairly disadvantage a beneficiary

why is disclosure to beneficiaries important?

because disclosure may form part of the trustee’s fiduciary duty

what is the key fiduciary principle trustees owe to beneficiaries?

trustees must act in beneficiaries’ best interest and administer trust properly according to law and the trust deed