KembaraXtra - Legal Terms - Rule in Howe v Dartmouth

The rule in Howe v Dartmouth requires trustees to act impartially between successive beneficiaries. Trustees must not favour one class of beneficiary over another unless the trust instrument clearly permits it. The rule traditionally applied to trusts created by will. It sought to balance the interests of life tenants and remaindermen. Equity therefore required fairness between present and future beneficiaries.

Historically, trustees were under a duty to convert certain wasting or hazardous assets into authorized investments. This protected remaindermen from the decline in value of speculative assets. At the same time, life tenants received income generated from the converted investments. The duty ensured that neither beneficiary gained an unfair advantage. The rule reflected equitable principles of impartiality.

The Trusts (Capital and Income) Act 2013 abolished the automatic duty to convert. Trustees are no longer generally required to sell wasting assets solely because of this rule. However, the underlying duty of impartiality remains. Trustees must still exercise their powers fairly. Their decisions must balance the interests of all beneficiaries.

The trust instrument may exclude the operation of the rule. Express wording may authorize trustees to retain particular assets or favour certain beneficiaries. Modern trust drafting frequently modifies or excludes traditional equitable rules. This provides greater flexibility in trust administration. Trustees must always comply with the terms of the trust.

The rule in Howe v Dartmouth remains historically important despite statutory reform. It illustrates equity’s insistence upon fairness between competing beneficiaries. Modern trustees continue to owe fiduciary duties requiring impartial administration. Understanding the rule helps explain the development of trust law. It remains a significant principle in the law of trusts.