How trustees must hold the balance fairly between competing beneficiaries and exercise their discretionary powers properly — from investment choices to unequal distributions and letters of wishes.
A trust with income beneficiaries on one side and capital beneficiaries on the other creates a built-in tension, and the rules in this chapter exist to manage it. The chapter begins with the duty of impartiality itself — what it requires, why it does not mean identical treatment, and how it yields to express terms favouring one beneficiary — before showing how that duty shapes investment, including the standard investment criteria under the Trustee Act 2000 and what a balanced portfolio looks like. It then deals with the historic apportionment rules and their disapplication by the Trusts (Capital and Income) Act 2013. Finally, it turns to discretion: what trustees of a discretionary trust must do compared with donees of a mere power, the requirements for distributing (including in unequal shares), the status of letters of wishes, and when fettering or other flaws will lead a court to review — though not substitute its own judgment for — a trustee's decision.
