U4 - Trustees' duties when running a trust

Who can trustees delegate their investment functions to?

1. 3rd party 2. One of their number (if suitably qualified)

Name some of the duties when starting out as a trustee.

1. Ensure they are properly appointed 2. Ascertain what is the trust property and take all reasonable and proper measures to obtain control over trust property 3. Review trust document and associated paperwork to familiarise themselves with trust and how it works 4. Enquire into past business of trust to ensure that there have been no past breaches and take appropriate action to remedy any breaches 5. Where there are trust chattels = draw up a proper inventory

There are certain exceptions as to when trustees can consider ethical/moral considerations when investing. What are these exceptions?

1. If an investment in an ethical concern is likely to yield as good as a return as an investment in a more morally dubious one 2. If a charitable trust = trustees can property refuse to invest in things at odds with charitable purpose 3. If declaration says not to invest in unethical matters

Investment Name some of the things trustees should consider when investing the trust fund.

1. Interest beneficiaries have 2. Circumstances of individual beneficiaries 3. How long the trust will last for 4. Size of trust fund 5. Tax position of trust and beneficiaries

What are the 5 main duties trustees have when investing?

1. Must have regard to the 'standard investment criteria' 2. Need for diversification 3. Must review investments from time-to-time 4. Act impartially between beneficiaries 5. Secure best return for beneficiaries

What is the duty of care test? 1. Objective 2. Subjective

1. Objective Note: may be higher for paid, professional trustees

What are the considerations trustees must comply with when delegating investment functions to a 3rd party?

1. Retain investment agent by written agreement 2. Prepare written statement (policy statement) providing guidance on how they should exercise their functions 3. Written statement must include term to effect agent will secure compliance with policy statement 4. Agent must comply with same investment duties that apply to trustees 5. Trustees must regularly review arrangement 6. Must select suitably qualified person to delegate to

Trustee Duty - Disclosure of Information What 3 documents are the beneficiaries entitled to see?

1. Trust document 2. Trust accounts 3. Schedule of trust investments/documents showing how trust is invested

Who is liable for investment agent defaults?

Agent themselves (not trustees) EXCEPTION: trustee breached their personal duties when delegating

What types of investments are trustees authorised to make under statute?

Any kind of investment they would make if they were absolutely entitled to assets (save as to land)

Trustee Duty - Act personally and unanimously What does it mean to act personally?

Cannot be a passive trustee Note: if taking advice from experts = cannot let expert make decision for them

A beneficiary makes an application to the court for disclosure of documents they are not automatically allowed to see. How does the court approach this?

Court starts with presumption that documents should not be disclosed

What is the overriding duty of trustees?

Duty of care

When delegating their investment functions to a 3rd party, trustees must prepare a written statement (policy statement). What must this statement contain?

Guidance as to how the agent should exercise their functions Term to effect agent will secure compliance with policy statement

When may trustees not need to obtain professional investment advice?

If they reasonably conclude it to be unnecessary/inappropriate to do so

When investing, trustees must have regard to the 'standard investment criteria'. What does this mean?

Investment must be suitable for the trust a. Should consider whether trust should be investing in that TYPE of investment b. Consider if that PARTICULAR investment is a good choice

Can trustees invest in land? If so, what are the requirements?

May acquire freehold/leasehold land in UK either: a. As investment b. For occupation by beneficiary c. Any other reason

Trustee Duty - Act impartially between beneficiaries

Must not benefit one beneficiary at the expense of another

Can beneficiaries demand to see a letter of wishes left by settlor?

No

Can trustees delegate their investment functions to a beneficiary?

No

Must trustees consult beneficiaries when carrying out their duty to act impartially between beneficiaries?

No

Can beneficiaries demand to see documents recording trustee's deliberations? If not, why not?

No Why - trustees are not obliged to give reasons for their discretions

Can trustees delegate their investment functions to a 3rd party by oral agreement only?

No - must be by WRITTEN agreement

If trustees decide to obtain investment advise, how much they act when selecting an advisor?

Reasonably

What investment duties apply to third party agents?

Same as those that apply to trustees

When investing, what is the general rule regarding ethical/moral considerations?

Should not be guided by such considerations

What should be the first consideration when investing the trust fund?

The declaration of trust Does it provide any relevant investment provisions?

Trustee Duty - Exercise discretions properly

When exercising discretionary power, they must: 1. Act in good faith 2. Rationally 3. For the purpose it was created 4. With regard to relevant material matters 5. With regard to all relevant facts 6. With regard to any legitimate expectation a beneficiary might have for that power to be exercised in a particular way

Trustee Duty - Reasons for exercise of power

Where a beneficiary has a legitimate expectation that a discretion will be exercised in their favour, trustees may be obliged to give reasons and advance warning if they are thinking of acting differently

When may the court refuse to grant an order for disclosure of trust documents to a beneficiary?

Where it would cause family fall out Would reveal confidential information about individual beneficiaries

Can a beneficiary apply to the court for disclosure of documents they are not automatically allowed to see?

Yes

Investment When considering investments, must trustees have regard to beneficiaries interests in the trust and the circumstances of individual beneficiaries?

Yes

Must the trustees act impartially when investing?

Yes - act impartially between beneficiaries

When investing, must trustees review investments?

Yes - duty to review from time-to-time

If trustees delegate their investment functions to a third party, can they be paid?

Yes - reasonably remuneration

If a trustee delegates investment functions to a third party, must they review those arrangements?

Yes - regularly

Do trustees have to act unanimously?

Yes - this is one of their duties

When investing, must trustees consider diversification?

Yes - under a duty to do so

Trustees can delegate their investment functions. Can they do this: a. Individually b. Collectively

b. Collectively