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Investment And Delegation Notes

GDL Law Notes > GDL Equity and Trusts Notes

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A more recent version of these Investment And Delegation notes – written by Cambridge/Bpp/College Of Law students – is available here.

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Topic 12 - Investment and DelegationTrustees (legal owners of the trust property) = bear all the rights and powers to deal with the property. Must exercise powers for the benefit of the beneficiaries
? Duty of investment = choosing investments the trustee must bear in mind: o 1. Act prudently to ensure that the funds are invested profitably, whilst preserving the fund from undue risk. o 2. Act even-handedly between different classes of beneficiary and balance the interests of present and future beneficiaries.
? First place trustee look for 'powers of investment' = the trust instrument itself. o = If silent over trustee powers - look to provisions in Trustee Act

2000. o Section 3 - gives trustee the power to make any kind of investment he could make if he were absolutely entitled to the property. o When exercising this power, the trustee must comply with the duty of care set out in section 1 of the Act, must have regard to the standard investment criteria (section 4) and must take proper advice (section 5).

* Statutory duties coexist with common law duties - to act evenhandedly between the beneficiaries and in the best financial interests of the beneficiaries.

* Trustees can delegate their duties to another party - so long as trust is administered to the required standard of a 'prudent man of business'. The Trustee Act 2000 - statutory regime of delegation. Duty to Invest
? Positive duty - On trustee to invest trust property. Cannot just sit back and allow trust property to stagnate, limited growth or worse deteriorate in value. Duty to grow it and mature it, and keep it safe.
? Power of investment varies - Trust Deeds will include 'investment powers' (express provisions) = outline what trustee can/cannot do, specific types of investments to be made. Only if well drafted. o Informal trust deeds or small trusts -will not include any trust powers. Statutory investment powers will come into force (TA 2000). o E.g. 'to A for life, remainder to B' = problem, as one of trustee duties is to act even-handedly, so you can't benefit 1 beneficiary over another, unless trust deed allows you to do it = life tenant receives the income generated from the trust property, when A dies, the trust property will be transferred to B as capital. Problem with investment, how do you balance out the two - keeping capital in tact for remainder-man but also grow and generate income in it for A.Express Powers:

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