#3262 - Trustees Powers - Private Client

• 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:

1. 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

2. 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.

• 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:

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:

1. Trustee can only advance a reasonable sum of income

2. 3 considerations that trustee must adhere to =

1. Age and requirements of the minor

2. general circumstances of the case

3. If there is any other income applicable for the same purpose

3. 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.

• 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!