Are trustees too powerful?

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Equity and Trusts

Assessment 2

Krishna pandya

Module Title: LW513

 Seminar leader: R.Greenland

Group number: 19

Are trustees too powerful?

“A trust has been described as the most important invention made by equity, as their lies as distinction between both the legal interests or estate as well as the equitable interest in property as under the trust the legal title will be vested in the trustees and the equitable title in the beneficiaries under the trust.” It therefore can be seen that there is no clear or satisfactory definition of what a trust actually is or what it amounts to, as trusts in general are seen to cover a wide Varity of situations such as; in the realm of “wealth management the concept of a Trust is seen as a way of holding personal wealth (security assets) confidentially.  Therefore Trusts have been created for many reasons; often in offshore jurisdictions, in an effort to reduce tax liabilities, to alter the devolution of assets on death, to avoid the inconvenience and publicity of probate and to shelter assets from actual or potential creditors.  A trust is the most common form of wealth structure to grow one’s wealth, enjoy it, protect it and pass it on to future generations with minimum dissipation through taxes, family disputes and governmental interference, as well as the protection of ones property. It therefore can be described as a “fire-wall” round ones security assets”.

Trusts have existed since the 19 Th centaury, and have seen to be described as a “powerful vehicle for the Chancery to apply its remedies to gaining property rights, as it has seen to impose stringent personal obligations upon a legal owner to hold property or the trust fund, for the benefit of another such that he is no longer able to treat the property as his own”. As it has been described to “lie in the medieval property devise of how the trust has been used” as “At the core of the trust concept is a duty of confidence imposed on a trustee in respect of particular property and positively enforceable by a person”.

The duties that trustees hold extend to areas such as a general duty to obey and familiarize the “terms of the conditions, history as well as the management of the trust, as well as a total compliance with the terms unless directed otherwise by the courts, the duty to safeguard the trust assets and making sure it meets the conditions of the trust instruments, the duties further extend to the ability to avoid conflict of interests, as well as acting with a conscious mind and reasonably ‘ a prudent person’ as well as with the expectation of achieving the highest returns in terms of investment, as well as the distribution of trust property equally and correctly and importantly in confidence and not for his own interests or to earn unauthorized profits, trustees also have the duty to provide  and account the correct information. A breach of any of these dutyies may give rise to the courts setting aside an exercise of the trustees powers.”

The question thus arises to what extent do trustees hold power. It is evident that trustees are given power over the trust funds, as they are seen as gatekeepers and protectors who over look over ones assets, and hold it for the overall benefit of the beneficiaries. Powers can therefore be described as “authority given to a person either by instrument or by statute to deal with or dispose of property in which he may have no beneficial interest, this can be seen to arise in two different forms one of which gives powers of disposition over the property such as the powers of appointment and those which give a power to deal with property in a particular manner.

A trustee therefore held under a trust is seen to be bound by the obligation to carry out the activities that are asked by them, as a trust can be  “described to be imperative, while under the powers of appointment, it can be seen to be discretionary”. The appointment of a trustee, places on them a general obligation to look out as well as hold property/income/shares for the beneficiaries, it can to a certain extent be said that trustees do hold a great deal of powers as they have the ability to decide whether they wish to “sell or deal with property held on the trust in a manner that is suitable to them, as no obligation would fall upon them” so long as they are given sole power of sale. Trustees are also seen to be seen to be working under a fiduciary relationship and once agreed upon can not be easily released form their obligation towards the trust in question, the issue to be addressed is; to, what “situations under statute holds trustees who are incapable of performing their duties, be removed from office that they have been appointed to or to be replaced by another”.

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It is within this jurisdiction that the question arises as to the powers of trustees. It can be seen that trustees have a lot of responsibility of looking after trust interests, however with all there duties which in general gave rise to powers of discretion, the law extending to the protection of the beneficiaries interests, when trustees breach their duties. It was therefore that different forms of trust have arisen, as it was viewed as general defense mechanism of protecting the interests of the beneficiaries, these in general branch out to areas such as:

 Express trusts, where a “settler makes ...

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