Challenging a Trust

There are a number of reasons why a trust which has been set up by a settlor may face challenge. By their very nature, trusts can be complex and often divisive and in some instances this leads to challenging or disputing the trust itself. 

Challenge a trustee


Beneficiaries are able to challenge decisions made by a trustee or trustees together if they feel they are acting in a negligent manner. This could be failing to invest trust capital safely and wisely in the beneficiaries best interest or allowing trust property to de-value. It is also possible to challenge a trustee if the beneficiaries or any other trustee becomes aware that they may be behaving in a dishonest or fraudulent manner to the detriment of the beneficiaries. Trustees found to be behaving in this way or failing to correctly meet their duties can be found to be in “breach of trust”.  

Breach of trust extends to more basic administrative problems also such as a trustee failing to administer a trust efficiently and in a timely manner.  

If there is more than one trustee then generally all trustees must be consulted with and reach agreement regarding decisions made relating to a trust. A trustee who fails to engage properly with other trustees and takes steps alone which effect the trust may also be found to be in breach of trust. Trustees who become aware another trustee has acted in breach of trust but chooses to ignore may also be challenged. In situations such as this, it may be possible for a beneficiary or another trustee to apply for the individual to be removed from their role as a trustee.  


Issues with Trust Documents


A trust may be challenged if the trust document is unclear as this leads to ambiguity as to what the trustees should do. Usually expert legal opinion can be sought to advise on the terms of a trust document to seek clarification as to what its interpretation should be. If it appears the trust document does not reflect the settlors wishes due to being poorly drafted or containing mistakes then this can lead to dispute as beneficiaries may be adversely affected by this to their detriment and seek remedy from the Court in this respect.  

This extends to the advice provided when the trust was set up being negligent from a legal advice perspective or a tax advice perspective to the detriment of the beneficiaries. Challenges can also be launched if it appears that the trust has been drafted in such a way that it does not allow the settlors wishes to be carried out effectively.  


Issues with Beneficiaries


If a trust has been drafted in such a way that financial dependents of the deceased are unable to claim assets from the trust, it is likely to lead to dispute. For example, if a settlor has left provision for a spouse on trust and the trustees use discretion and refuse to make provision from the assets for that spouse, then the spouse (or any other financially dependent beneficiary) may take action to claim under the Inheritance (Provision for Family and Dependents) Act 1975 if agreement cannot be reached.  


Issues with Settlors


In order to set up a trust the settlor must have sufficient mental capacity to give instructions for the trust to be prepared. They must understand clearly the implications of the trust and the effects it may have on any beneficiary as well as understanding and weighing up that information. If there is concern a settlor lacked sufficient capacity then a trusts validity can be challenged. This also extends to if there is concern that the settlor was unduly influenced in any way or coerced into making the trust under duress by another person. 

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