Trustees Duties and Powers - Essay Example

?Trustees Duties and Powers In the first part of the first question, Bill has been given an envelope where Sally had mentioned the following: “To Bill - please hold the ?25,000 legacy I have given you on trust for George. Do not let Harry get his hands on it.” Understanding from the above statement, Sally had given 25,000 from her trust to George and did not allow her son Harry to get his hands on this money. After Sally died, the sealed envelope was opened and now Bill has the decision to make a choice as to what he needs to do with the money. Before we proceed with the answer to this question, let us first analyze what do us means by trust, executor and other essential points required to find the answers to the questions. “A Trust is an arrangement where one or more persons (the “Trustees”) hold property for another person or persons (the “Beneficiaries”). This relationship is governed primarily by the document creating the trust (the “Trust Deed”) and by legislation and case law. Legal ownership of Trust property is in the Trustees’ names but the beneficial interest belongs to the beneficiaries. The idea behind a Trust is the concept of duty. Trustees are under a duty to deal with the property in their hands in the interests of the beneficiaries. If they do not do so, they will be in breach of Trust and the beneficiaries may seek relief from the courts to ensure that the terms of the Trust are carried out.” Understanding from the above explanation, we find that a trust is an arrangement of one or more persons, who are known as the trustees. Over here, Sally is a trustee. A trustee arranges property, which may also be included as cash money, for the benefit of another person or persons, and those persons are known as beneficiaries. Therefore, from the understanding of the quoted text, we may figure out that under this circumstance, Harry and Caroline. The question is whether George may be included as a beneficiary for the 25,000 USD legacies. With regard to the first question, the trust which Sally had held for George is a secret trust. She has put the 25,000 on her own legacy as the money which is deemed to be distinguished from the main trust beneficial to her 2 children. There are many reasons why an individual might want to have a protective trust against the name of an outsider, however the purpose is to allow a certain sum of money as a safeguard in case of any misfortune or unfortunate event happening in the distribution of the trust. Since Bill is the executor of the will, it is on his discretion to award the legacy of the trust to George. The gift which Sally has given to George is a valid gift under the law of trust and therefore should be awarded to the beneficiary, which is George on the discretion of Bill himself. B) The second question is as follows: “Harry has, since Sally’s death, been made bankrupt. He asks for money from his trust fund to buy a house for himself Louise and George to live in.” As mentioned before, Harry is one of the main beneficiaries in the distribution of the trust. Even though his mother did not approve of his lifestyle and found him to be irresponsible to carry out the duties as beneficiary properly, there is no denying to the fact that he is indeed one of the beneficiaries and therefore has all the rights under the trust law to claim his stake in the property left by his mother. Understanding from the above statement, only the trustee has the power to assign where the trust is distributed, and the document of trust has the final binding nature with respect to the distribution of the trust property. Over here, Sally had assigned a protective trust to her son of an amount of 500,000 USD to be given to him, and the rest on RSCPA. “In order to understand a protective trust, it is first necessary to understand the purpose of its establishment. In contrast to an asset protection trust, which tends to be established with the interests of the settler (that is, the individual establishing the trust) in mind, a protective trust tends to be set up to secure the needs of the beneficiary. In general terms this means that assets are settled (that is, they are transferred into the trust) with the purpose of producing an income that can be drawn by the beneficiary. However, in contrast to other types of trust that pay an income to a beneficiary, a protective trust arrangement allows this individual to dispose of the asset as they see fit; they could generally sell the assets that have been settled at any time. As such, even if the settler intends for the asset to provide an income for a set period for the beneficiary, the latter may scupper these intentions by selling the asset earlier and taking the resulting capital.” From the above passage, a private tryst is made for the benefit of the beneficiary and it can only be obtained when there is a real need for the money. From the understanding, a protective trust pays off the liabilities and other expenses of the beneficiary to the extent which he needs it to be. Now, Harry has gone bankrupt, Therefore, it is the duty of the executor to pay him an amount up to 500,000 which might suffice his needs and the requirements to come out of bankruptcy and let him lead a comfortable life. If the money spent is less than 500, 00 the rest of the cash goers to charity. If not, then the entire sum goes to saving Harry form bankruptcy. Let us analyze the third question: “It is now three years since Sally’s death. Caroline, who is at university, asks for money to pay off her student loan and buy a car. Bill tells you he has not yet paid any money from the trust to Caroline.” The condition which was laid down for the completion of this trust is as the following: “I give the residue of my estate to Bill to hold on trust for Caroline if she attains the age of 25 years, and if not, to the RSPCA. “ Let us analyze the powers and functions of a trustee: “Subject to the provisions of the trust instrument, some of the powers are discretionary, and other powers may only be exercised with the consent of the Court. These powers include the power to prudently invest the trust funds and the power to advance funds for the maintenance, education and benefit of the beneficiary. Where the trust includes real estate, the trustee has the power to insure and repair the trust property. “ Since under this case the trustee has died, her executor has the power and the responsibility to decide for the trust. He is now having the discretion to appoint the distribution of the trust property as and how he deems fir to be. It is on Bill's discretion to give the money to Caroline worth the estate so that she can pay off her education loan and buy a car. Since at this moment she is only 20 years old and has not reached the age of 25 which was a condition with respect to her getting the money worth the estate, nevertheless, if Bill deems it fit then he may distribute some money so that she can pay off her loan and buy a car, and the rest may be given when she attains the age of 25 years. Part 2 A) Before we go into the merits of the questions, it is pertinent to note the obligations and the duties of the trustees. Let us gain an understanding from reading the passage below: “The trustee has a duty to administer the trust with skill and care as a person of ordinary prudence would use in dealing with his or her own property and to be loyal to the beneficiaries. The trustee is a fiduciary for the beneficiaries. Any actions taken by the trustee are viewed in respect to these duties and to the trustee's fiduciary obligation. The focus is on what a reasonable person would do to accomplish the trust's objectives, not the trustee's subjective intentions. For instance, if the trust document stipulates that the beneficiaries are to receive enough income for their comfort and support, then the trustee has a duty to inquire into the condition of each beneficiary to determine their needs. If the trustee fails to carry out the terms of the trust or falls short in his fiduciary obligation to the beneficiaries, then he may be liable for breach of trust.” Getting back to the first question, the point of contention is whether the beneficiaries can bring an action against Barry. One of the most important points to note is that Barry and Alice were the trustees of Charlotte’s trust, and therefore had a duty to abide as trustees and to not misuse the funds. Now, on the question whether Barry maybe held liable for the actions of Alice, the answer is no, Barry cannot be held liable for the loss of 50,000, as he was not the one who misused the funds. The trustee maybe held liable for breach of trust if he has given the green signal to another trustee to misuse the funds. Reading from the facts of the case there is no where mentioned that Barry gave permission or agreed upon the misuse of funds by Alice. He was oblivious to the whole scam and therefore is not liable for the breach of trust. B) The beneficiaries may claim heavy charges from Alice for the breach of trust. Following are points which may be referred to calculate the remedies for the breach of trust: “The remedy for breach of trust depends on the breach, but the main objective is to make the beneficiaries whole. (b) Lists the following remedies, allowing the court to: compel the trustee to perform his duties or to pay money or restore property; enjoin the trustee from committing a breach of trust; order a trustee to account; suspend or remove the trustee, and appoint a special fiduciary to take possession of the trust property and administer the trust; reduce or deny compensation to the trustee; void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of and recover the property or its proceeds; or Order any other appropriate relief.” However, under this situation Alice shall be held liable to restore the trust in the way it was before she committed the breach of trust. She should pay off the money to the extent which she had stolen and should put the funds of trust back in the way they had been assigned by Charlotte. Alice committed a huge error by using the funds of the trust for her own benefit. She violated the code of a trustee in a big way and also lost the faith of the beneficiary. Therefore she should now pay the exact sum of money which she had siphoned off from the trust bank account and repay the damage caused to the beneficiaries. C) In the third question, the point of contention is whether the beneficiaries may hold liable Michael for breach of trust. To answer this question, let us analyze the most fundamental aspect for deciding upon the liability of the damage with respect to the relationship between the beneficiary and the trustee. One of the most basic contentions to hold any individual held liable is to make sure that he was in a fiduciary relationship with the beneficiaries. If that is not the case then no case may be made out for the remedies of the breach of trust. Understanding from the facts of the case, Michael was not a trustee to the beneficiaries. So the question which arises is whether he was in a fiduciary relationship with the beneficiaries, if yes then he may be held liable and if not then he may not be held liable. “Trustees are of course fiduciaries, and were the basis of the equitable action founded In a fiduciary relationship, actions following breach of trust would fit comfortable Within its bounds. In the event, the important point raised by authority is that the Fiduciary relationship need not be between the plaintiff and the defendant so long as it Existed between the rightful owner of the property and the person to which it was Originally entrusted. For example, B may confer property to the trustee T, who then Improperly transfers it to C. B may recover from C even though there was no fiduciary Relationship between them.” The above passage is enough to answer the question. Even though Michael was not the trustee, he still derived benefit out of the property of the beneficiaries. Therefore, applying the law to the facts, Michael maybe held liable for the breach of trust. Gaining from this point, the beneficiaries have a claim against him to the same effect as they have against Alice for remedies against breach of trust. D) The final question pertains to whether Barry can remove Alice from her trusteeships with or without the approval of the beneficiaries. According to the facts of the case, Alice who is one of the trustees has been found guilty of misusing the funds of the trust for her own personal benefit. The question which now arises from this point is whether Barry may remove her. The answer would be yes, but under certain discretionary powers. He has to consult and inform the beneficiaries that he is going to remove Alice from the job of the trusteeship. The reason maybe self explanatory, as she was found guilty of misusing the trust, and therefore it is under the benefit of both the parties that she may be removed so as to have the trust without any malafide people running and managing it. Alice did not run the trust in the right way and was found breaching the trust as well as the confidentiality aspect of the beneficiaries. She did not fulfill her duties as a bona fide trustee under such circumstances. She was under a fiduciary obligation with respect to the beneficiaries and did not abide by such obligations. She broke the fiduciary relationship by mishandling the funds of the trust, and therefore such reasons are enough for Barry who was running the tryst along with her to relieve her from this position and to manage the trust alone. He may inform the beneficiaries but is not bounded to take their permission to go ahead with the removal of Alice as the trustee. Works Cited The Trust Benefits - Sanctuary Trust Law - Sanctuary Trust Law. 2011. The Trust Benefits - Sanctuary Trust Law - Sanctuary Trust Law. [ONLINE] Available at:http://www.sanctuarytrustlaw.co.nz/wawcs0148162/idDetails=168/The-protective-trust.html. [Accessed 05 September 2011]. Webliography http://www.estatesortrusts.co.uk/about-protective-trusts.html http://www.publictrustee.sa.gov.au/products-and-services/trusts/duties-and-powers-of-trustees.html http://www.archivioceradi.luiss.it/documenti/archivioceradi/impresa/comparato/Sebastianutti.pdf http://thismatter.com/money/wills-estates-trusts/breach-of-trust.htm Read More