Administrative Powers for Personal Representatives and Trustees
| Author | Lesley King/Peter Gausden |
| Pages | 213-225 |
19.1 Introduction
Both PRs and trustees are in a fiduciary position, and, in the absence of express provision in the will, are subject to a number of restrictions and obligations. It is common to remove some of these to facilitate the administration of estates and trusts.
When administering the estate or managing a trust created in the will, PRs and trustees need various administrative powers. The will can confer such powers expressly. If it is silent, various statutory powers are implied. The most important statutes are the AEA 1925, the Trustee Act 1925 and the Trustee Act 2000.
For the purposes of the legislation, and for this chapter, the term ‘trustee’ includes a PR.
Although the statutory powers are very useful, they are not ideal for all situations. Some are subject to limitations which the testator may wish to remove or vary in order to give greater freedom to the trustees.
19.2 STEP standard provisions
The Society of Trust and Estate Practitioners (STEP) publishes a set of standard administrative provisions which can be incorporated into a will by reference by using the words:
The standard provisions of the Society of Trust and Estate Practitioners shall apply to this will.
Many practitioners like to use the standard provisions as they provide relatively full coverage of the needs of a standard estate or trust. In 2011 a second edition of the provisions was published, and no doubt further
214 Wills: A Practical Guide
editions will be published to take account of changing circumstances. Therefore, practitioners must specify which edition is to be incorporated.
19.3 Legacies to minors
As a result of sections 3 and 5 of the Children Act 1989, a guardian or person with parental responsibility for a minor can provide a receipt for a legacy on behalf of the minor.
In the case of a small legacy, a testator may prefer to provide that the PRs can accept the receipt of the minor.
Alternatively, the testator may consider appointing trustees to take the legacy on behalf of the minor, in which case it is normally appropriate to make the legacy contingent on reaching a specified age.
It is advisable to provide expressly whether or not a legacy carries intermediate income as contingent pecuniary legacies do not normally carry the right to intermediate income (see para 18.1).
19.4 Power to invest
The statutory powers of investment are contained in the Trustee Act 2000. The general power of investment is contained in section 3, and authorises trustees to make any kind of investment that they could make if they were absolutely entitled to the trust assets. It does not authorise trustees to buy land, which is dealt with expressly under section 8. Trustees can, however, invest in loans secured on land.
The statutory power is in addition to any express power contained in the will or trust instrument, but subject to any restrictions imposed there. It applies to trusts and wills whenever created.
When exercising any power of investment (express or statutory), section 4(1) of the Trustee Act 2000 requires the trustees to have regard to the ‘standard investment criteria’ which are set out in section 4(3). Section 4(2) requires them to review the trust investments from time to time and decide whether, in the light of those criteria, the investments should be varied. The criteria are:
(a) the suitability to the trust of investments of the kind proposed and the suitability of the particular investment as an example of that type;
(b) the need for diversification of investments of the trust, insofar as is appropriate to the circumstances of the trust.
The duty to consider the criteria cannot be excluded. However, in cases where a testator intends the trust to be a vehicle for holding a particular asset, such as land or shares in a family business, the testator should leave a statement of wishes by way of guidance on the extent to which diversification is appropriate. In Gregson v HAE Trustees Ltd and Others [2008] EWHC 1006 (Ch), [2009] 1 All ER (Comm) 457, the court pointed out that the qualification in section 4(3)(b) of the Trustee Act 2000 that the trustees must consider diversification ‘in so far as is appropriate to the circumstances of the trust’ means that the trustees can properly take into account matters such as the nature and purposes of the trust, its provisions, any letter of wishes and the feelings of beneficiaries at this point. The court also stated that a trust instrument can go so far as to provide that the original trust investments are not to be sold (although the particular instrument under consideration had not done so). It is unlikely that any sensible testator would want to include a blanket prohibition on sale.
Before investing, or when reviewing investments, section 5 of the Trustee Act 2000 requires the trustees to obtain and consider ‘proper advice’. Proper advice is the advice of a person reasonably believed by the trustees to be qualified to advise, by reason of having ability in and practical experience of financial and other matters relating to the proposed investment. Trustees are relieved of the obligation to take advice if they reasonably conclude ‘that in all the circumstances it is unnecessary or inappropriate to do so’ (section 5(3)). Matters which might justify a decision not to take advice are:
(a) the expertise of individual trustees;
(b) the fact that the amount to be invested is small in relation to the trust as a whole.
When exercising any duties in relation to investment, section 1 of the Trustee Act 2000 requires trustees to exercise such care and skill as is reasonable in the circumstances, having regard in particular:
(a) to any special knowledge or experience a trustee has or holds himself out as having; or
(b) to any special knowledge or experience it is reasonable to expect of a person, when acting in the course of a business or profession.
Express provision is required in the following cases:
(a) to permit an ethical investment policy;
(b) to...
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