Trusts and Equity - Coursework Example

TRUSTS AND EQUITY WORK Q) The trust fund includes shares in a private company which manufactures luxury accessories and stationery products and the will contained a direction to the trustees not to sell those shares but to retain them. Adam and Beth have received an attractive offer to sell the shares to another shareholder and their investment advisers have advised them to accept the offer (as they consider the shares are in a sector that is likely to fall in value in the near future) and to reinvest the proceeds of sale in a selection of stock exchange investments to reduce risk. Trustees of Trust have many responsibilities in the exercising of their duties as a trustee. The areas that often posses most difficulties for trustees and is most often misinterpreted, in this area of investment. The Trustee Act 1956 followed an approach of a permitted legal list can be amended from time to time by the new categories if investment. However even though there are no restrictions on the type of investment the trustees can make. There is a general requirement that a trustee exercising any power of investment shall exercise the care, diligence and skill that a prudent person of business the affair of authors. Adam and Beth should consider to take the investment idea that investment advisor have proposed to them. They can invest in stock exchange in order to reduce the risk for losing a lot of money in their investment. The act allows the trustees to invest in any asset as if they were absolutely entitled. The power to invest can be overridden or amended by any investment powers in the trust deed. Typically, these allow trustees to invest in a wide range of investment such as life assurance products, deposits and shares. When selecting investment like investing in shares, the trustees are required to regard the standard vestment criteria that the investment should be suitable and diversified. In order to meet the requirement of the Trustee amendment Act, it is strongly recommended that trustee should work with qualified financial planner who has experience in trustee investment. It should be noted that the investment strategy applied to the trust assets like those shares that Adam and Beth have in that private company can be significantly different than that for an individual. This is because a trust can have different classes of beneficiaries such as income beneficiaries and capital beneficiaries. Modern trusts tend to be fully discretionary trust which will require the trustees to carefully balance all the interest of their beneficiaries. Q) Mark’s 5 grandchildren are aged between 10 and 17. The oldest grandchild, Harry, was convicted last year for travelling on a train without a ticket. Harry has asked Adam and Beth if it is possible for the clause that beneficiaries should not be convicted of any criminal offence before their 21st birthday to be deleted from the trust. The trustees are sympathetic to Harry’s request as they think this was a youthful prank and that he has already learned a hard lesson from this incident. The trustees ordinance of 1961, under section 32, where any property is held by the trustees in trust for any for any interest whether vested or contingent, then subject to any prior interest affecting the property. During the infancy of such person (Harry) if his interest so long continues, the trustees may, at their sole discretion, if any, apply towards his maintenance, benefit or education. Any other fund is applicable for the same purpose as any person bound by law to provide for his maintenance or education. If such person is about to attain the age required for him to benefit from the trust, the rightful trustees can apply for a plea that his youthful prank be ignored and to include him as one of the beneficiaries of the trust. The issues considered in the advancement of trust depend on the trustees to deal with the flexibility of the trust fund in order to meet the needs of their beneficiaries. Whenever a trust is located is most commonly a discretionary trust. This means that the trustee has full discretion as how the trust fund is allocated and how much each beneficiary is to be allocated. The Settlor may give out a “letter of his wishes” to the trustee setting out guidelines and what portion should be attributed to any given beneficiary and what stage the payment should commence (Thurston 65). It must however be emphasized this letter is non binding both in theory and in practice. So the trustee can readily ignore the conditions of the Settlor depending on the matter at hand. Since Harry the trustees are sympathetic to Harry’s request as they think this was a youthful prank and that he has already learned a hard lesson from this incident. Adam and Beth know very well that Harry has violated the agreement stated by Mark but have the pressure to sympathize with the condition that Harry is in. The Trust clearly stipulates that his should be deleted on the basis of the criminal offense committed (Lionel 78). However, in an attempt to gain some indirect control over the absolute discretion the beneficiaries usually employ a lawyer or a confident to act as confident. The method used may be different but the protector has the power to make recommendations after careful analysis of the issue. Furthermore, the trustees will be liable to act without favor or prejudice between all the beneficiaries so that no particular individual or class preferential treatment or the liability for breach of trust. Where any property is held by trustees in trust for any other person for any interest whatsoever, then, subject to any prior interest or charges affecting that property. Provided that, in deciding whether the whole part of the income of the property is during a minority to be applied for the purpose aforesaid, the trustees shall have regard of the infant and his requirement to the circumstances of the case. Q) Whether it would be possible for the terms of the trust to be changed so that the grandchildren will not receive their shares under the trust until they are 25 years old. Adam and Beth believe that 21 is too young for the beneficiaries to have control of such large sums of money. They are influenced by the fact that the parents of another grandchild, Milly who is aged 16, have confided in the trustees their concerns about Milly. They say that she consistently overspends her monthly allowance from her parents and that she has also run up alarming debts on her mobile phone. In the absence of express power, trust capital can be used for the benefit of a beneficiary who is not yet entitled to such capital. The power of advancement refers to the power of the trustees to advance the capital to a beneficiary that will help in the future. Trustees may at any time apply for any capital subject to a trust for the advancement in their absolute discretion, think fit, of any person entitled to the capital of the trust property any share thereof, whether absolutely or contingently on his attaining any specified age on the occurrence of any event. For this case the age that the trustees want to be put in order for them to benefit from trust is 25 years due to Mary’s spending behavior. The power of advancement can be exercised only if its for the benefit of the child to be advanced or, as was said during argument, it is thought to be “ good thing: for the advanced person to share of capital before his or her own time. The power of advancement can be exercised only if there was some good reason behind it. Mary’s credit problems give a viable case for the age to be pushed ahead. The good reason must be beneficial to that person to be advanced; the power cannot be exercised capriciously or with some benefit in view. Unless the trust makes a specific stipulation as the to the use of money once advanced to the beneficiary, it may cumbersome to prevent such misuse. The general aim behind the formality requirements like other contracts serves as a precaution to those declaring that a trust can be modified to meet demand of most of the trustees (Wilkie 78). As formality requirements may not be always satisfactory, the courts are faced a difficult task where there is evidence of the intentions of the trustees. Milly can oppose this notion and claim that the money she overspends is from the parents and not from the trust fund. In addition, she can argue that by the time she reaches 21 she would have become of age and not overspend the trust fund money. This case involves very complex situations and can have difficult issues to be clarified. On balance, it seems that that the courts have to come to an agreement now in order to save a situation that can be detrimental in the future. They court can also consider the age of Milly and the possibility that she can change the behavior of over spending. The claims that Adam and Beth have are not on writing are valid but unenforceable in law by the beneficiaries of the trust fund (Thurston 4). Similar to the above case on Harry, there is a possibility that Milly can also change her spending ways by the time she reaches 21 years. The principle function of 31 appears to be supply a code of rules governing the disposal of income especially during a minority, in cases whether a settler has made disposition of capital. Therefore, to obtain advancement other than benefit of the beneficiaries would not be a power of advancement. There is also a need to distinguish between a beneficiary seeking advancement and a trustee stipulating the form of advancement. In order to leave the payee free in order to decide how it will apply in the application of a new trust property. Generally, the trustees will wish to appoint professional to act on their behalf. In this case, Adam and Beth will seek to delegate such professional to do their trusteeship responsibilities. The question that will have to be considered is the liability for breach of trust, or failure to achieve the best possible results when the trustee’s powers are being carried out by custodians. When a trust is created, its terms become binding on the subsequent actions of the trustees in relation to the trust property. The trust, once it has be signed, it remains set in stone unless there is some provision unless there is some provision in the trust which permits an alteration in the manner of its exercise. Like in this case, the age that was initially put for the beneficiaries was 21 years but due to some necessary changes, the trustees advocated for the age to be pushed forward to 25 years. Q) If you had the power to make ONE change to the Variation of Trusts Act 1958, explain what change you would make and why? If I had the power to change the Variation of Trust Act 1958, I would change part II – General Powers of Trustees and personal Representatives The power of trustees for sale to sell by auction Recommended changes: Where a trust for sale of proper is vested, he may sell or concur with any other person, either subject to prior changes or not respecting such conditions respecting title or evidence as the trustee will deem fit (Campbell 56). Where trustees grant any property on lease vested in a trustee, he may make, on such terms and condition that may deem proper with nominal version. When any grant or sub lease purports are to be made in exercise of a power conferred by this section, this power will be approved and exercised properly. Power to sell subject to depreciatory conditions and under Recommended changes No sale made by the trustee shall be impeached by any beneficiary on the grounds that any of the conditions that are subject to sale have been made on unnecessary depreciatory. There should be no sale made by the trustee after the execution of the conveyance. A trustee who is a vendor may sell without excluding the application of the section two of the vender and purchase Act. Power to raise money by sale, mortgage Recommended change Where trustees have the power by the instrument to apply capital money subject to the trust for any purpose and have the power to raise the money required by sale or any part of the trust property. Work cited Lionel S. Reimagining the Trust. London. Routledge . 2009 Gordon B. Administering of wills, trusts and Estates . New York. Cengage. 2005 Wilkie B: Revision guide: Equity and Trust. New Jersey. John and Wiley. 2002 Jurianz J. Equity and Trust. New York. Cengage. 2002 Campbell E. Changing the terms of trust. Chicago. University of Chicago. 2000 Brightwell J. Lewin on Trust. New Jersey. John and Wiley. 2005 Thurston. J A practitioner’s Guide to Trust. Routledge . 2009 Mathew Connaglen Fiduciary Loyalty. New York. Cengage. 2005 Read More