Claims against trustees

Trusts are an effective way of protecting and preserving wealth and dealing with any complex family dynamics. Trusts are often an important part of estate planning, keeping money and assets safe for the future. It is important that a settlor thinks very carefully about who they appoint as a trustee as it is often not an easy role.  

Acting as a trustee involves significant responsibility and there are certain duties trustees must adhere to in order to act properly and in the best interest of the beneficiaries. This includes ensuring estate assets are protected and dealt with properly on behalf of the beneficiaries and ensuring the right professional advice is taken to ensure any trust administration is carried out effectively, correctly and in a timely manner so as not to prejudice the trust assets or the beneficiaries interests.  

If a trustee fails to carry out their responsibilities properly or acts to the detriment of the beneficiaries, individuals are able to make a claim against a trustee or trustees in a number of situations. 

Mismanaged trust fund assets

Issues can arise where a trustee has made an incorrect distribution from the trust either knowingly or by mistake. This could be by paying someone to much to the detriment of other beneficiaries or making a distribution to an incorrect person.  

Mismanagement of trust fund assets can also include making poor investments that are high risk or failing to take appropriate advice on investments or purchases. It can also include failing to insure property that belongs to the trust or allowing property to fall in to disrepair affecting it’s value or by failing to claim rental income available from property. 

Failure to act on the trust instructions

This can arise whereby a trustee fails to administer a trust in accordance with its provision or in accordance with any letter of wishes (subject to discretion being exercised). This could include preventing a beneficiary from living in a property or accessing funds that they are entitled to according to the terms of the trust. This would also apply to a trustee failing to pay trust income to a beneficiary who is entitled to such income. 

Breach of trust

A trustee can be challenged if there is concern that they are in breach of trust. This could be due to them not being honest and providing beneficiaries with information that they are entitled to or failing to disclose issues that may affect the trust fund value. 

A trustee can be found in breach of trust if they have failed to meet their obligations and responsibilities to the beneficiaries or if they have turned a blind eye to a co-trustee acting in breach of trust.  

A breach of trust can occur for many reasons including failing to meet responsibilities as a trustee, behaving in a negligent way which is detrimental to the beneficiaries, hiding information or refusing to provide reasonable information, dealing with requests and the trust administration in a timely and efficient manner and abuse of trust funds such as treating them as if it were their own and using the same for their benefit.  

Trustees have a duty of care to beneficiaries of any trust. Beneficiaries are reliant upon their judgment and capability to make the right decisions on their behalf. If there is concern a trustee may have breached the duty of care, there are a number of remedies that can be explored: 

• Take steps to recover information and written documentation about the trust assets and accounts  
• Application can be made to remove or replace a trustee 
• Action can be taken to recover money taken or distributed incorrectly from a trust 

In extreme cases, if a trustee has committed theft or fraud , there is a possibility of criminal charges being brought against them.