trsts Ro2

Question 1

Trustees’ primary duty

Answer 1

To hold and administer trust property for the benefit of the beneficiaries in accordance with the trust provisions

Question 2

Source of trustees’ powers and instructions

Answer 2

The trust deed (and general trust law where relevant)

Question 3

Trustees’ obligation regarding the trust deed

Answer 3

Trustees must follow the instructions and powers set out in the trust deed

Question 4

Duty to protect trust property

Answer 4

Trustees must safeguard trust property and act as legal owners

Question 5

Examples of title documents trustees should hold

Answer 5

Share certificates, life policies, and property title documents

Question 6

Registration requirement for trustees

Answer 6

All trustees should be registered as legal owners on relevant registries (e.g. Land Registry, company share register)

Question 7

Purpose of trustees’ actions

Answer 7

Everything trustees do must be for the benefit of the beneficiaries

Question 8

Authorisation for trustees’ actions

Answer 8

Actions must be authorised by the trust deed or general trust law

Question 9

Duty of impartiality

Answer 9

Trustees must act impartially between beneficiaries

Question 10

Statutory duty of care source

Answer 10

Trustee Act 2000 (or trust deed if specified)

Question 11

Activities covered by the statutory duty of care

Answer 11

Investments, acquisition of land, appointment of agents, nominees and custodians, and insurance of trust property

Question 12

Standard of care for professional trustees

Answer 12

A higher standard of care applies than for lay trustees

Question 13

Duty when cash enters the trust

Answer 13

Trustees must invest the cash wisely and appropriately unless it is to be paid out immediately

Question 14

Investment powers under modern trust deeds

Answer 14

Usually wide powers of investment are granted

Question 15

Investment position before Trustee Act 2000

Answer 15

Trustees were restricted to authorised investments under the Trustee Investments Act 1961

Question 16

Investment power under Trustee Act 2000

Answer 16

Trustees may make any investment as if they owned the property outright, subject to duty of care

Question 17

Application of Trustee Act 2000 investment powers

Answer 17

Applies to all trusts whenever formed, unless restricted by the trust deed

Question 18

Key limitation on Trustee Act 2000 powers

Answer 18

The Act does not override provisions in the trust deed

Question 19

Standard investment criteria under Trustee Act 2000

Answer 19

Suitability of investments and need for diversification where appropriate

Question 20

Duty to review investments

Answer 20

Trustees must keep investments under regular review and vary them if appropriate

Question 21

Duty to obtain investment advice

Answer 21

Trustees must obtain and consider proper advice unless it is reasonable not to do so

Question 22

When investment advice may be unnecessary

Answer 22

Where the trust fund is small or trustees possess sufficient expertise

Question 23

Trustees’ ongoing investment responsibility

Answer 23

Trustees must monitor investments regularly

Question 24

Leading case on trustees’ investment duty

Answer 24

Nestlé v NatWest Bank (1993)

Question 25

Significance of Nestlé v NatWest

Answer 25

Confirms trustees are judged on overall investment strategy, not individual poor investments

Question 26

Additional duty of professional trustees regarding investments

Answer 26

Must consider the tax position of the trust and beneficiaries

Question 27

Accountability of professional trustees

Answer 27

Professional trustees are held more accountable than lay trustees

Question 28

Duty to keep trust accounts

Answer 28

Trustees must keep proper and accurate accounts of trust property

Question 29

Beneficiaries’ rights to information

Answer 29

Beneficiaries may demand accounts and reasonable information about trust dealings

Question 30

Trustees’ liability for losses

Answer 30

Trustees are personally liable for losses caused by default or bad management

Question 31

Standard of diligence required

Answer 31

Trustees must exercise utmost diligence to avoid loss

Question 32

Consequence of breach of duty

Answer 32

Trustees are liable to beneficiaries for breach of trust

Question 33

Duty regarding conflicts of interest

Answer 33

Trustees must avoid conflicts of interest

Question 34

Conflict issue where trustee is also a beneficiary

Answer 34

Creates potential difficulty but conflict must still be managed appropriately