I am currently dealing with a discretionarty trust, which states that a trustee cannot exercise their powers to benefit themselves, unless there is an independent trustee in office to ratify their decision.
I am aware that the trustees can sometimes take comfort from the fact, that if they were the original trustees (i.e. they were appointed by the Settlor) and all remain in office, then they may not be criticised. In this particular case, neither of the trustees were originally appointed, but they were appointed by the Settlor later on, as the Settlor retained a power to appoint trustees.
My view is that, notwithstanding this, the trustees will still need to appoint an independent trustee if they wish to benefit themselves, but do any forum members think that this isn’t required in view of the fact that they were actually appointed by the Settlor?
Anything other than appointing an independent trustee is likely to lead to problems. The deed itself states that and I cannot see how that can be overridden.
I agree. I used to modify standard precedents to clarify that after-appointed trustees of a particular category should be in the same position as an original trustee as regards the self-dealing rule.
Whilst there is a Common Law presumption that the original trustees can exercise their powers to benefit themselves if they are within the class of beneficiaries, this must be subject to there being no provision within the trust instrument which conflicts with the Common Law presumption.
When specific provisions are incorporated into the trust instrument, whether that is a trust deed or a will, which conflict with the Common Law principle, to my mind these displace the Common Law position and need to be strictly complied with.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals