Q&As

Can the trustees of a discretionary NRB trust created in a Will make a loan to a beneficiary prior to assets or cash being vested in them by the executors?

read titleRead full title
Published on LexisPSL on 24/12/2020

The following Wills & Probate Q&A provides comprehensive and up to date legal information covering:

  • Can the trustees of a discretionary NRB trust created in a Will make a loan to a beneficiary prior to assets or cash being vested in them by the executors?
  • If there is no express power to lend in the Will
  • If the trustees have an express power to lend in the Will
  • If the executors have an express power to constitute the trust with a debt from the surviving spouse or with a legal or equitable charge
  • Termination of the trust in favour of the surviving spouse

Can the trustees of a discretionary NRB trust created in a Will make a loan to a beneficiary prior to assets or cash being vested in them by the executors?

The question refers to the trustees' 'general power to lend'. Trustees do not have a general power to lend, unless the loan represents an investment by the trustees in exercise of their statutory or express powers of investment.

If there is no express power to lend in the Will

As set out in Practice Note: Trustees—trustees' power to lend, trustees’ statutory powers of investment are set out in section 3 of the Trustee Act 2000 (TrA 2000) and known collectively as the general power of investment. The general power of investment applies:

  1. where there are no express powers of investment within the trust instrument or where the express powers are more limited than the statutory powers, and

  2. to trusts and Will trusts created before and after the commencement of TrA 2000

Although the general power of investment in TrA 2000, s 3 is very wide, it is subject to:

  1. the duty to 'invest' the trust fund

  2. the statutory duty of care

  3. the standard investment criteria

  4. the duty to review 'investments'

  5. the duty to obtain advice

The power of investment authorises loans by way of investment, however, it would seem that in situations where the loan is interest free, where

Related documents:

Popular documents