CeMAP FRE1 Legal Concepts: Contract, Agency, Property, Insolvency, Wills & Trusts question: trustees of a family trust

CeMAP FRE1Legal Concepts: Contract, Agency, Property, Insolvency, Wills & Trusts

The trustees of a family trust, none of whom is a finance professional, want to invest £400,000 that the trust deed does not restrict. Under the Trustee Act 2000, what must they do?

A Invest only in gilts and bank deposits, because the Act limits trustees without financial qualifications to safe assets
B Obtain the beneficiaries' written consent before making any investment decision
C Place the money with a single fund manager and accept no further responsibility
D Have regard to suitability and diversification, and obtain proper advice unless that is unnecessary

Show the answer and explanation

Answer: D. Have regard to suitability and diversification, and obtain proper advice unless that is unnecessary

The Trustee Act 2000 gives trustees a general power of investment as if they were absolute owners (s3), subject to the standard investment criteria of suitability and diversification (s4) and a duty to obtain and consider proper advice unless they reasonably conclude it is unnecessary (s5). They owe the statutory duty of care (s1). The old narrow-range limits of the Trustee Investments Act 1961 were repealed, beneficiary consent is not required, and delegating to a manager does not end their duty to keep the arrangement under review (s22).

Common mistake

Applying the repealed 'safe investments only' rules to modern trustees.

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