Summary: Ws5. Running Trust

Read the summary and the most important questions on WS5. Running Trust

• 3 Duties of Trustees

• 3.1 The Main Duties of Trustees

• What standard of care must trustees exercise when fulfilling their duties? What is the main authority?

  Trustees must exercise the same level of care as would a prudent man of business (Speight v Gaunt).

• 3.2.1 Authorised investments under the Trustee Act 2000 ss 3 and 8

• Explain what trustees under s3 of the Trustee Act 2000 can invest in? Are there any restrictions?

  Section 3 provides that the trustees can make any investment that they could make if they were absolutely entitled to the trust fund.

• Under section 3 of the Trustee Act 2000, an investment is expected to do what?  What is the main authority?

  An investment is expected to produce income or capital growth (Harries v Church of England Commissioners); (Cook v Medway Housing Authority).

• Under section 3 of the 2000 Act, in what circumstances are trustees are able to lend money?

  If the trustees obtain a mortgage over the borrower's land as collateral. For example, the trustee could lend money to the beneficiary to buy a house provided that the loan is secured by a mortgage on the house.

• Can the beneficiary force a trustee to follow his wishes, e.g. force the trustee to give the beneficiary a loan?

  SS 3 and 8 of the Trustee 2000 Act gives discretion to the trustees and the beneficiaries cannot control the trustees' discretions.

• 3.2.2 Investment Duties Imposed by ss 4 and 5 of the Trustee Act 2000

• 1. Under section 4 of the 2000 Act, are trustees able to invest in unsuitable investments that impact the interests of the life tenant and remainderman?

  The trustee must make suitable investments that are appropriate for the trust and suitable for the interests of the life tenant and remainderman.

• 2. When can the trustee consider diversification of investments of the trust under s4 TA 2000?

  Diversification of investments can be considered insofar as is appropriate to the trust.

• 3. When should trustees consider and obtain advice about their investment under s5 TA 2000? Are trustees obliged to obtain advice?

  Trustees must obtain and consider proper advice about their investment unless it is unnecessary or inappropriate.
  
  Trustees are not obliged to follow advice.

• 4. Is it necessary for trustees to review trust investment and consider whether it should be varied under ss 4(2) and 5(2) TA 2000?

  From time to time, trustees must review trust investments and consider whether they should be varied by considering the standard investment criteria (ss 4(2) and 5(2)).

• 3.2.3 Statutory Duty of Care

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• What general level of care must trustees exercise? Which section of the 2000 Act is relevant?

  S.1 of the 2000 Act states that the trustees must exercise reasonable care and skill in the circumstances.