Trustee presentation

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  • Im an Executor/Trustee. Get me out of here!14 May 2013

    Presented by:Chris GreenwellScott McKittrick Claire Herbert

  • What we want to tell you about Choosing trusteesRemoving trusteesBeneficiaries' right to information Duties, obligations and breaches ReliefsProtecting trustees who part with trust assets

  • Choosing trusteesWho chooses trustees?

    Trustees are initially chosen by settlor (via trust document or Will)New trustees are chosen by an appointor or current trustees (if there is no appointor)In unusual circumstances new trustees may be chosen by either the beneficiaries or the court

  • Choosing trusteesFactors that may limit the choice of trusteesThe trust document can impose restrictions.If the settlor or a beneficiary (or potential beneficiary) is a trustee, there may be a conflict of interest.If the trust document does not contain a charging clause, a professional trustee will not act.

  • Choosing trusteesIf a trustee is a director or shareholder of a company in which the trustees hold shares, the law does not allow the trustee to receive directors' fees unless the trust document expressly authorises this.A company can only act as a trustee if its articles of association allow it to do so.There are some specific restrictions on an undischarged bankrupt acting as a trustee of certain types of trust.

  • Choosing trusteesWho can be a trustee?SettlorBeneficiaryProfessional personAny other individualCompanyLLP

    The trust document can impose restrictions

  • Choosing trustees

    How many trustees?

    Only four trustees can be appointed for a trust of landTwo trustees are required to give good receipt under a trust of land except where a sole trustee is a trust corporationIt is only permissible to have a sole trustee if the original trustee was a sole trustee and the trust is not a trust of land

  • Choosing trusteesFactors to considerIndividual trustee may know the settlor and his family personally but there can be practical problems if he dies or loses capacityCorporate trustee provides continuity in the trusteeship but there is likely to be a turnover of employees dealing with the trust

  • Choosing trusteesProfessional trustee should be regulated and offer a level of expertise but charges for the serviceA trustee being appointed to an existing trust should examine books and documents to review the state of the trust

  • Choosing trusteesCommon choices for UK trustsFor a small trust, two or three family trustees, who carry out some of the trust administration themselves and instruct professional advisers when needed.For a medium-sized trust, between two and four individual trustees, including both family members and professional trustees. A professional trustee's firm usually administers the trust.

  • Choosing trusteesFor a large trust, a corporate trustee and one or two family trustees. The corporate trustee usually provides trust administration services.

  • Choosing trusteesConflict of interest

    If the settlor or a beneficiary is a trustee, there is a possible conflict of interest between his interest as settlor or beneficiary and his duties as a trusteeIf family members are appointed to be trustees of family trust, certain issues need to be considered e.g. is there a balance between different parts of a family

  • Removing trusteesExpress power of removal

    Trustees may be removed by exercise of a power expressly conferred on a person by the trust instrumentAn express power of removal is strictly construedThe power is usually fiduciary (exercised for the benefit of the beneficiaries and not of the donee of the power himself)

  • Removing trusteesReplacement (S.36 Trustee Act 1925)

    The power to replace trustees may only be exercised in specific circumstances The power may be exercised by those nominated by trust instrument or continuing trustees (if there is no person nominated)The power may be limited in scopeAppointment should be made by deed (allows automatic vesting under S.40 Trustee Act 1925)

  • Removing trusteesRemoval by the court (S.41Trustee Act 1925)

    A claim under this section is appropriate to replace trustees where two conditions are met:It is expedient to appoint a new trustee(s)It is inexpedient, difficult or impracticable to do so without the assistance of the courtIt may sometimes be more appropriate to use courts inherent jurisdiction (e.g. where trustee wishes to remain in office)

  • Removing trusteesRemoval by the court under its inherent jurisdiction

    The welfare of the beneficiaries is the focus of the court's considerationThe court also exercise their jurisdiction with a view to the security of the trust property, an efficient and satisfactory execution of the trusts, and a faithful and sound exercise of the powers conferred on the trustee

  • Removing trusteesCompulsory retirement (S.19 Trusts of Land and Appointment of Trustees Act 1996)

    This power can only be used if certain requirements are met and can be excluded by the trust documentA direction must be given by beneficiaries in writingA trustee must retire if he receives a valid directionRetirement should be effected by deed

  • Removing trusteesReplacement for mental incapacity (S.20 Trusts of Land and Appointment of Trustees Act 1996)

    This power can only be used if certain requirements are met and can be excluded by the trust documentA direction must be given by beneficiaries in writingTrustee must lack capacity within the meaning of the Mental Capacity Act 2005.Appointment should be effected by deed

  • Removing trusteesProcedure for court to remove trustees

    Removal may be carried out as part of an administration claim or as a stand-alone claimIn urgent cases the court may order removal on an interim applicationThe court will decide who pays costs in a claim for removal

  • Right to informationInformation trustees are under a duty to provide

    An adult beneficiary who has an interest in possession is entitled to know of the existence of the trust and the nature of their interestObjects of discretionary trusts should know of the existence and nature of their interestTrustees ought to inform those who are real potential candidates for benefit under a discretionary power

  • Right to informationPosition before Schmidt -v- Rosewood [2003]Beneficiaries had a proprietary right to see trust documentsThe right to see documents only extended to documents relating to the ownership, management or administration of any property vested in the trustees

  • Right to informationPosition before Schmidt -v- Rosewood [2003]The trustees were exempt from disclosing:The agendas of trustee meetingsCorrespondence between the trusteesCorrespondence between the trustees and the beneficiaries

  • Right to informationPosition before Schmidt -v- Rosewood [2003]Minutes of trustee meetings and other documents disclosing: The deliberations of the trustees as to the manner in which they should exercise their discretionary powers; The reasons for any particular exercise of such powers; or The materials on which such reasons were, or might have been, based

  • Right to informationFacts of Schmidt -v- Rosewood [2003] The case was decided under Manx law, but is based on English trust law principles and mainly English case lawTwo discretionary settlements, created in 1992 and 1995 by Mr Schmidt's father and established under the laws of the Isle of ManRosewood Trust Limited had been the trustee of both settlements since 1997

  • Right to informationFacts of Schmidt -v- Rosewood [2003] The assets of the settlements were worth over US$105millionThe settlor died intestate in 1997, and letters of administration to his estate were granted to Mr SchmidtMr Schmidt began proceedings in the Isle of Man in June 1998, alleging breach of trust and breach of fiduciary dutyMr Schmidt obtained an order requiring extensive disclosure of information

  • Right to informationFacts of Schmidt -v- Rosewood [2003] Mr Schmidt was not satisfied with the disclosure he obtained as it raised more questions than it answered, especially as parts of some of the disclosed documents had been obliteratedIn June 1999, he brought proceedings seeking fuller disclosure in two capacities:His personal capacity, as the possible object of a wide power to add to the class of beneficiariesHis capacity as administrator of his late father's estate

  • Right to informationFacts of Schmidt -v- Rosewood [2003] The trustees opposed disclosure, arguing that the claimant was not a beneficiary under the settlements, and his father was never more than a mere object of a powerAn order for disclosure was made by the High Court of the Isle of Man but set aside on appealThe claimant then appealed to the Privy Council in London

  • Right to informationDecision in Schmidt -v- Rosewood [2003] The Privy Council held that a proprietary right was neither necessary nor sufficient for the exercise of the courts jurisdiction:A beneficiarys right to seek disclosure of trust documents, although sometimes not inappropriately described as a proprietary right, is best approached as one aspect of the courts inherent jurisdiction to supervise (and where appropriate intervene in) the administration of trusts

  • Right to informationDecision in Schmidt -v- Rosewood [2003]The right to seek the courts intervention does not depend on entitlement to a fixed and transmissible beneficial interest. The object of a discretion (including a mere power) may also be entitled to protection from the court of equity, although the circumstances in which he may seek protection, and the nature of the protection he may expect to obtain, will depend o