Equity and Trust Law

Trust Law & Investment Approaches | 3 Things you should know

By January 30, 2019 No Comments
trust law
Here’re few things to know about Trust Law. The Trustee Act 2000 significantly altered the duties of a trustee when investing. In the past, there were two approaches that were used to regulate how trustees could invest: the prudent person approach and the legal list approach. These approaches are common in many legal systems; the critical issue is how their application in the UK has changed in the last two centuries, in response to changes in the investment climate. Competent¬†law tutors in London can help you to understand what the current position of the law is insofar as the trustee duties of investment are concerned.

The Legal List Approach

According to this approach, a trustee can only invest in specified types of investment. For instance, under the legal list approach, a trustee can be permitted to invest in several investment categories. Although this approach is easy to enforce and it makes it easy for trustees to tell when they are wrong, it is less flexible, and the room for diversification is limited.

The Prudent Person Test

This approach is relatively flexible. It does not specify any categories of investment for trustees. Instead, it requires them to act prudently in carrying out their investment duties.

The Trustee Act 2000

Section 3(1) of the act allows a trustee to make any form of investment if they are absolutely entitled a trust’s assets. In effect, this provision abolished the legal list approach. Today, a trustee is only required to be prudent when investing.

The Takeaway

Overall, it is apparent that due to changes in the investment climate in the last two centuries, the applicable laws regulating how a trustee should carry out investment duties have undergone significant changes. For instance, the Trustee Act 2000 did away with the legal list approach. Therefore, when it comes to making investment decisions, a trustee only has to be prudent and observe the current best practice. Get a reliable two tutor in London today to gain a deeper understanding of the duties of a trustee when it comes to investing.