I've got the power – I think?
Specific terms of each trust deed are important – always check what does the deed actually say?
Has the trust been varied, or the proper law changed?
The title of a supplemental deed can be misleading – check that no changes to the trust have been made alongside, e.g. an addition of beneficiary.
How do I exercise my power?
Example formal requirements:
- By deed – i.e. a written resolution is not enough
- Consent – e.g. prior written consent of a Protector needed
- Whose power is it? – the Trustees, a Protector, some other named third party?
- Unanimous decision or by majority where more than one trustee?
- Proper law – what is the governing law of the trust and how does that impact upon the powers and liabilities of the Trustees?
Restrictions??
Beneficiaries – can you benefit the proposed person or are they excluded by name or by description, e.g. by being resident in a certain jurisdiction?
Investments – are there restrictions on the type of permitted investments? Is the consent of a named person needed?
Variations – permitted under the trust deed? E.g. a pension scheme may not be amended in certain circumstances if it has a stated main purpose.
Why does it matter?
Risk to Trustees of claim for breach of trust, negligence or an action being held a fraud on a power.
Actions taken incorrectly may be invalid with potential tax consequences.
Finally – even if a trustee has a power it needs to consider all relevant and disregard all irrelevant considerations before exercising that power.
Nobody said that being a trustee was an easy job!
As ever record keeping is key – and check the trust deed again!
Originally published 2 June, 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.