TRUSTS AND POWERS
Examples
(1) Gift- I hereby give the sum of £10,000 to Mrs Carly Butler to hold absolutely and for her own
benefit.
(2) Fixed trust- I hereby give the sum of £10,000 to my trustees to hold upon trust for Mrs Carly Butler
and Mr Adam Woodward in equal shares.
(3) Fixed trust with power of appointment- I hereby give the sum of £10,000 to my trustees upon trust
for Mrs Carly Butler and Mr Adam Woodward in equal shares, with a power to appoint the whole or part
of the said sum of £10,000 to any graduate of the University of Nottingham as the trustees may think
fit.
(4) Power of appointment with gift over in default- I hereby give the sum of £10,000 to my trustees with
power to appoint the whole or part of the said sum of £10,000 to any graduate of the University of
Nottingham as the trustees may think fit. In default of appointment, to transfer to Mrs Carly Butler
absolutely.
(5) Power of appointment with fixed trust in default- I hereby give the sum of £10,000 to my trustees
with power to appoint the whole or part of the said sum of £10,000 to any graduate of the University of
Nottingham as the trustees may think fit. In default of appointment, to hold upon trust for Mrs Carly
Butler and Mr Adam Woodward in equal shares.
(6) Discretionary Trust- I hereby give the sum of £10,000 to my trustees upon trust for such of my
children living at my death and in such shares as my trustees in their absolute discretion shall decide.
Gifts
No separation of legal and equitable ownership- donor transfers absolute ownership to the
donee and is thus entitled to the benefit
Transfer is generally unconditional and if the donor tries to attach conditions to it, equity will
usually ignore this stated purpose and it will constitute a gift to the donee outright
Powers of appointment
Must distinguish a trust power under a discretionary trust and a fiduciary power exercised by
trustees as a power of appointment
‘Dispositive’ powers of appointment provide authority to select who will be the recipients of
property and to what extent
Where they are not acting under a trust, it is completely within their power whether or
not to give the money out
Trustees also have administrative powers, such as the powers of investment and to appoint new
trustees
A donor confers power (typically settlor/testator) and the donee receives the power with the
authority to exercise (typically trustee)
, A donee becomes the appointer on the exercise of power and the objects of power
become appointees
Powers of appointment given to trustees in their capacity as trustees are known as fiduciary
powers and powers of appointment given to non-trustees (including trustees acting in their
personal capacity) are known as bare/mere powers
‘When a mere power is given to an individual, he is under no duty to exercise it or even
to consider whether he should exercise it. But when a power is given to trustees as such,
it appears to me that the situation must be different. A settlor or testator who entrusts a
power to his trustees must be relying on them in their fiduciary capacity so they cannot
simply push aside the power and refuse to consider whether it ought in their judgment to
be exercised’ (Re Gulbenkian’s Settlement [1970])
Key distinctions between a trust and power
Powers of appointment are permissive (‘may’) whereas under a trust, this obligation is
mandatory (absolute discretion only to the share of the money to each child)
I hereby give the sum of £10,000 to my trustees with power to appoint the whole or part
of the said sum of £10,000 to any graduate of the University of Nottingham as the
trustees may think fit.
I hereby give the sum of £10,000 to my Trustees upon trust for such of my children
living at my death and in such shares as my trustees in their absolute discretion shall
decide.
If a trustee dies without appointing property on trust, the court will enforce this
An unexercised power will lapse on trustee’s death and the court will not enforce
A trust instrument may impose both trust obligations on trustee (which may include powers of
distribution (eg. discretionary trust)) and create powers that may be exercised by trustee under
a general trust fund
Fiduciary powers (of appointment) are exercised in the trustee’s special capacity as a fiduciary, rather
than as part of a trust
Sometimes referred to as trust powers
No duty on trustee/donee (receiving the power) to appoint anyone, although they have a duty to
at least consider exercising the fiduciary power
For example, subcommittee of trustees may meet a few times a year, minuting their
meetings and discussing the possibility of exercising powers
Failing this, the court may compel them to consider exercising their power
If exercised, the court may also ensure appointments are fair and without fraud
Established that the duties of a trustee which are ‘specific to a (fiduciary) power seem to be
threefold’ under Re Hay’s Settlement Trusts [1981]
(1) ‘Consider periodically whether or not he should exercise the power
(2) Consider the range of objects of the power and
(3) Consider the appropriateness of individual appointments’
The court will intervene where fiduciary power is exercised without due consideration
Turner v Turner [1984] held that trustees had a duty to ‘consider’ before appointing and
therefore made three appointments of other family members of trustees in breach of
duty
Examples
(1) Gift- I hereby give the sum of £10,000 to Mrs Carly Butler to hold absolutely and for her own
benefit.
(2) Fixed trust- I hereby give the sum of £10,000 to my trustees to hold upon trust for Mrs Carly Butler
and Mr Adam Woodward in equal shares.
(3) Fixed trust with power of appointment- I hereby give the sum of £10,000 to my trustees upon trust
for Mrs Carly Butler and Mr Adam Woodward in equal shares, with a power to appoint the whole or part
of the said sum of £10,000 to any graduate of the University of Nottingham as the trustees may think
fit.
(4) Power of appointment with gift over in default- I hereby give the sum of £10,000 to my trustees with
power to appoint the whole or part of the said sum of £10,000 to any graduate of the University of
Nottingham as the trustees may think fit. In default of appointment, to transfer to Mrs Carly Butler
absolutely.
(5) Power of appointment with fixed trust in default- I hereby give the sum of £10,000 to my trustees
with power to appoint the whole or part of the said sum of £10,000 to any graduate of the University of
Nottingham as the trustees may think fit. In default of appointment, to hold upon trust for Mrs Carly
Butler and Mr Adam Woodward in equal shares.
(6) Discretionary Trust- I hereby give the sum of £10,000 to my trustees upon trust for such of my
children living at my death and in such shares as my trustees in their absolute discretion shall decide.
Gifts
No separation of legal and equitable ownership- donor transfers absolute ownership to the
donee and is thus entitled to the benefit
Transfer is generally unconditional and if the donor tries to attach conditions to it, equity will
usually ignore this stated purpose and it will constitute a gift to the donee outright
Powers of appointment
Must distinguish a trust power under a discretionary trust and a fiduciary power exercised by
trustees as a power of appointment
‘Dispositive’ powers of appointment provide authority to select who will be the recipients of
property and to what extent
Where they are not acting under a trust, it is completely within their power whether or
not to give the money out
Trustees also have administrative powers, such as the powers of investment and to appoint new
trustees
A donor confers power (typically settlor/testator) and the donee receives the power with the
authority to exercise (typically trustee)
, A donee becomes the appointer on the exercise of power and the objects of power
become appointees
Powers of appointment given to trustees in their capacity as trustees are known as fiduciary
powers and powers of appointment given to non-trustees (including trustees acting in their
personal capacity) are known as bare/mere powers
‘When a mere power is given to an individual, he is under no duty to exercise it or even
to consider whether he should exercise it. But when a power is given to trustees as such,
it appears to me that the situation must be different. A settlor or testator who entrusts a
power to his trustees must be relying on them in their fiduciary capacity so they cannot
simply push aside the power and refuse to consider whether it ought in their judgment to
be exercised’ (Re Gulbenkian’s Settlement [1970])
Key distinctions between a trust and power
Powers of appointment are permissive (‘may’) whereas under a trust, this obligation is
mandatory (absolute discretion only to the share of the money to each child)
I hereby give the sum of £10,000 to my trustees with power to appoint the whole or part
of the said sum of £10,000 to any graduate of the University of Nottingham as the
trustees may think fit.
I hereby give the sum of £10,000 to my Trustees upon trust for such of my children
living at my death and in such shares as my trustees in their absolute discretion shall
decide.
If a trustee dies without appointing property on trust, the court will enforce this
An unexercised power will lapse on trustee’s death and the court will not enforce
A trust instrument may impose both trust obligations on trustee (which may include powers of
distribution (eg. discretionary trust)) and create powers that may be exercised by trustee under
a general trust fund
Fiduciary powers (of appointment) are exercised in the trustee’s special capacity as a fiduciary, rather
than as part of a trust
Sometimes referred to as trust powers
No duty on trustee/donee (receiving the power) to appoint anyone, although they have a duty to
at least consider exercising the fiduciary power
For example, subcommittee of trustees may meet a few times a year, minuting their
meetings and discussing the possibility of exercising powers
Failing this, the court may compel them to consider exercising their power
If exercised, the court may also ensure appointments are fair and without fraud
Established that the duties of a trustee which are ‘specific to a (fiduciary) power seem to be
threefold’ under Re Hay’s Settlement Trusts [1981]
(1) ‘Consider periodically whether or not he should exercise the power
(2) Consider the range of objects of the power and
(3) Consider the appropriateness of individual appointments’
The court will intervene where fiduciary power is exercised without due consideration
Turner v Turner [1984] held that trustees had a duty to ‘consider’ before appointing and
therefore made three appointments of other family members of trustees in breach of
duty
