When deciding whether to include these powers when writing a will…

Look to WILL DRAFTING points if asked to evaluate a will/ why would you make these changes?

Legislation:

Trusts of Land and Appointment of Trustees Act 1996 [TLATA_
Trustee Act 2000 [TA]

Power to insure

S.19 TA 1925 = very restrictive on what Personal Representatives [PRs] / Trustees could insure against

Insure only against loss or damage by fire;
Insure up to 75% of the value of the property max;
Had to pay premiums out of income

TLATA 1996 = could also insure land [but still not other assets] for its full value
S.34 TA 2000: substituted a new S.19. Wide powers to insure:

Against all property to its full value [however caused].
Pay premiums out of trust funds [can use capital and / or income]
Applies to ALL trusts whenever created.

Statutory power is adequate without need for extension.
Be aware that old wills [drafted before 2000] often include provisions to extend powers to insure.

Power to appropriate

S.41 Administration of Estates Act 1925
PRs have power to appropriate any part of the estate towards satisfaction of a legacy – provided that no specific beneficiary is thereby prejudiced. [e.g. cannot appropriate a clock for Carol [beneficiary of 1000) if Ben has already been left the clock in the will.

Also a useful power if there is split residues. [2 people have entitlement]

S.41 imposes some restrictions which can be amended if appropriate:

Must get consent of person to whom PR is making appropriation.

AMMEND: remove need for consent.

WHY: Administration is easier. What if beneficiary is a minor – consent would not be possible in this case

Must get valuation of the object at date of appropriation [not at date of death].

AMMEND: remove need for re-valuation. Use the valuation at date of death instead. [unless asset has grossly changed in value since date of death]. So PR appropriates at probate value!

WHY: Avoid expense. Administration of estate is easier / simple.

NB. If asset is likely to change in value – then keep the statutory restriction.

Power to accept RECEIPTS from or on behalf of a minor

Receipt = discharge PRs from liability. Signed by the person entitled [i.e. beneficiary]. Provides evidence of legacy being paid [for purpose of any potential dispute]
General law = unmarried minor cannot give receipt for capital OR income. A married minor can ONLY give receipt for income. Danger of PR being personally liable.
S.3 Children Act 1989: PR can accept receipt from parent / guardian in respect of income and capital to which minor is entitled.
S.42 AEA 1925: Where minor beneficiary is entitled absolutely - PR can appoint a trustee to hold property for that minor. Trustee can provide a receipt. This is often inconvenient.

WILL DRAFTING:

Consider allowing receipts from 16 years olds

Power to invest

Trustees holding relevant proportions of the estate [as directed by the will]. Ts must invest the trust fund – they have a fiduciary duty under general trust law.
Trustee Investment Act 1961 = very restrictive
Trustee Act 2000: S.3 “trustee may make any kind of investment that he could make if he were absolutely entitled to the asset of the trust”. Wide powers to invest now!
NB. Trustees STILL have to consider standard investment criteria [e.g. suitability of investment; need for diversification; obtain proper advice unless it is unnecessary].
TA 2000 also gives Trustees power to delegate and vest trust property in a nominee
TA 2000 imposes a duty of care on trustees to exercise skill and care that is reasonable in the circumstances

WILL DRAFTING:

No need for amendment in most cases as TA 2000 confers the discretion that trustees require
Should there be a provision for:

Suitability
Diversification
Review – e.g. every 6 months
T seeking advice

Power to purchase land

S.8 TA 2000 – allows trustee to purchase freehold / leasehold land in the UK
Applies to all trusts [whenever created] – subject to any restriction in the will
Applies to legal interest only
Land can be used for anything – investment, for beneficiary’s occupation or any other reason. [Remember fiduciary duty]

WILL DRAFTING:

Extend to outside the UK if it is suitable

Power to maintain a minor

“maintenance”

The power enabled the minor to benefit from the INCOME of a trust fund whilst under age. Trustee has to use discretion in favor of that minor.
S.31 TA 2000: contains some restrictions:

Trustee can only advance a reasonable sum of income
3 considerations that trustee must adhere to =

Age and requirements of the minor
General circumstances of the case
If there is any other income applicable for the same purpose

S.31(2) TA = minor has right to the income at the age of 18. Plus any accumulated income.

WILL DRAFTING:

Remove the need for reasonable

WHY: avoid challenge to trustees decision – avoid dispute

Remove the requirement to consider the ‘3 considerations’

WHY: avoid challenge to trustees decision – avoid dispute

Remove beneficiary’s right to income at age of 18

WHY: if it is necessary because it is inappropriate for young person to inherit such a large amount of money.

Power to advance capital

“advancement”

Power enabled the beneficiary to have the benefit of part of the CAPITAL entitlement earlier that he /she would receive it under the terms of the trust.
S.32 TA 2000: some restrictions on the trustee =

Advance only up to half of the vested contingent interest
Any advancement must be “brought into account” when B becomes absolutely entitled
Any person with a prior interest must consent to the advancement

[e.g. to my wife for life then my children = wife must consent if children want a advancement of capital]

WILL DRAFTING:

Allow T to advance ALL capital – for flexibility
Remove requirement of bringing into account - for flexibility
Remove requirement to get consent from person with prior interest – for flexibility

Only amend to what is appropriate in the circumstances!!!!!!

Apportionment

Apportionment Act 1870 [S.2] and Case law – to try and achieve fairness between life tenants and remaindermen.
Complicated and time consuming
Requites cumbersome apportionment of INCOME [tries to balance people’s entitlement to capital and their entitlement to income]

WILL DRAFTING:

REMOVE ALL rules of apportionment – both equitable and statutory
So administration of estate is easier and faster!

Power to charge

General rule = trustees may not profit from their trusteeship
Unsatisfactory for professional trustees
S.28 TA 2000 = new rules for interpretation of charging clauses in favor of trust corporations / PRs acting in a professional capacity:

S.28

Deaths on / after 01.02.2001 = express charging clause is not to be treated as a gift for purposes of S.15 Wills Act 1837 [failure of gift if beneficiary witnesses a will]

S.29

Implied professional charging clause – trust corporations entitled to receive “reasonable remuneration” for all services provided (even if they could have been done by a law person).

Other professional trustees can be entitled to remuneration provided ALL trustees give written consent. This cannot apply to a SOLE trustee.

WILL DRAFTING:

Widen the powers so that all trustees can charge [not just professional trustees]
Ensure by express clause that all trustees can act and be paid [including sole trustee – as implied charging clause will not work for them under S.29]

Relationship between beneficiaries and trustees

S.19 TLATA: beneficiaries can force Ts to retire and choose and appoint their...

#13763 - Trustee Powers And Will Drafting Pointers - Private Client

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