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#16658 - Trustee Powers - Private Client

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TRUSTEE POWERS

Administrative Provisions – statutory provisions contained in Trustee Acts 1925 & 2000 Examples:

Common Extensions to Powers of Trustees

 Power to Invest

  • Wide investment powers in Part II TA 2000 – s.3

    • s.4 – consider suitability and diversification

    • s.5 – take advice from a competent person “unless they decide this is inappropriate or unnecessary in the circumstances”

  • Expand investment powers

    • common to expand to enable widest possible investment, including in foreign and non-income-producing assets

    • extend power to purchase a property for investment or occupation to include power to purchase/improve property and to impose conditions regarding occupation
Power to Purchase a House

  • S.8 TA 2000 – power to buy freehold/leasehold property for occupation by a beneficiary

  • Extension only needed if further powers are required
Power of Maintenance

S.31 TA 1925

  • Permits trustees to apply available income for the maintenance, education, and benefit of minor beneficiaries

  • Amending: give trustees an unfettered discretion, and removing right for contingent beneficiary to receive income at age 18

    • N.B. The Inheritance and Trustees’ Powers Act 2014
Power of Advancement

S.32 TA 1925

  • Permits trustees to apply capital for the advancement or benefit of the person with a vested or contingent interest in the capital

  • Consider excluding some or all of the limitations imposed by s.32

  • All capital may be advanced (up to the limit of B’s share) and it will be deducted from B’s share

  • Must get the consent from the person with the prior interest (ex-person with life interest)

  • Amending: can remove the s.32 power or allow trustees to only advance a limited amount of capital or dispense with consent

    • Could amend as s.32 gives no power to make advancements or loans to life tenants

    • N.B. The Inheritance and Trustees’ Powers Act 2014
Power to Run Deceased’s Business

  • Where the estate includes a business that was run by the deceased as a sole trader, the powers of the PRs to run that business are limited (e.g. may only run the business with a view to sale; may only use those assets used in the business at death)

  • Where appropriate, it will be necessary to extend these powers
Apportionment Rules

  • Advisable to exclude:

    • the rules for apportionment of income contained in Apportionment Act 1870 and Howe v Lord Dartmouth (1820)

    • the rule for apportionment of debts in Allhusen v Whittell

  • This is no longer necessary since The Trusts (Capital and Income) 2013
Right to Appoint New Trustees

  • S.36 TA 1925: if a new trustee needs to be appointed, the choice and appointment rests with the continuing trustee(s)

  • The settlor can only exercise sole control over trustee selection during his lifetime if the trust appointment gives him the appropriate power

  • S.19 TLATA 1996: if the beneficiaries are between them entitled to the whole equitable interest and are all of full age and capacity, they can require the existing trustees to retire and appoint specified new trustees to replace them

Additional Drafting Considerations

 Charging Clause

  • Only if a professional adviser is appointed

  • ss.28 & 29 TA 2000 – allows trustees to charge reasonable remuneration where:

    • they are professional trustees and not the sole trustee, AND

    • they have the written consent of all co-trustees

a trust corporation can charge reasonable fees

  • Extend charging clause:

    • perhaps extend to cover any professional or business person and/or remove the reasonableness limitation

    • “Any Trustee who is engaged in a profession or business may charge remuneration for any services provided to my estate”
Exculpation Clause

  • Exclude liability for actions in good faith

    • “No Trustee shall be liable for any loss to the Trust Fund however arising except as a result of the actual fraud or dishonesty of such trustee”

 Jack and Jill as trustees take a decision to sell T’s Tesco shares in order to distribute cash to the beneficiaries...
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