Chapter 4
Trustees’ powers


4.1A significant proportion of the Trustee Act 1956 is made up of sections that provide trustees with powers to manage trust property. These sections set out the default position and are capable of being overridden by the trust deed. In this chapter we look at reforms to the powers provisions of the Act. In particular, we look at replacing the current approach, which contains various limits to a trustee’s powers in relation to trust property, with an approach that gives trustees broader powers.

4.2This chapter addresses:

4.3Investment powers are addressed separately in chapter 5. It should be noted that the proposals in this chapter relating to the appointment of agents and delegation do not apply to the appointment of an investment manager, as this is dealt with in chapter 5. The trustee’s right of indemnity out of trust assets is addressed in chapter 8.

4.4The proposals in this chapter take the general approach of removing the unnecessary restrictions on powers that are in the current provisions of the Trustee Act and instead relying on clear statements of the duties of trustees to guard against inappropriate use of powers by trustees. Our view is that this approach is better at making sure the default powers provisions in the new Act are sufficiently flexible and suitable for the majority of trusts. The broader default powers ensure that trustees can do their job. The interests of beneficiaries or the trust’s purpose will be protected by the duties a trustee must adhere to in making any decision or exercising any power as trustee. The role of the duties would be given prominence by setting them out in the proposed Act (see chapter 3).

4.5The administrative and distributive powers provisions discussed in this chapter are default in that they may be varied or excluded by the terms of a trust. In trust deeds settlors can give the trustees whatever powers they like to manage and distribute the trust property. The proposal would become the default position for existing trusts and so would apply unless the terms of a trust provided for something different.