Trustee Dispute – A Case Study

Mrs and Mrs Smith were married and had three daughters, Lucy, Claire and Nicola.

Lucy and Claire were married and had families and homes of their own. They were both in secure jobs. Nicola lived on her own in rented accommodation and was only able to work on a part-time basis due to health issues. Nicola was in receipt of benefits to supplement her income. Mr and Mrs Smith had helped Nicola out financially in the past.

Mr and Mrs Smith owned a property mortgage free which had a value of around £300,000 and joint savings of £75,000. When Mr Smith died, the property and their joint savings passed to Mrs Smith.

Mrs Smith wanted all three of her daughters to benefit equally from her estate when she died but was concerned about leaving a large amount of money to Nicola due to previous issues with Nicola’s spending.

Mrs Smith decided to leave her estate in Trust for her three daughters to benefit them all equally when she died. Mrs Smith named her two eldest daughters, Lucy and Claire, as the Trustees of the Trust with all three daughters being named as Beneficiaries of the Trust.

Mrs Smith was confident that Lucy and Claire would do the right thing by their younger sister, Nicola, but wrote a letter explaining her reasons for setting up the Trust. In that letter, Mrs Smith expressed a wish that Nicola was not to receive a large lump sum from the Trust and that if the property was sold, Nicola’s share was to be invested.

Mrs Smith did not take account of sibling rivalry or the fact that Lucy and Claire had always thought that Nicola had received preferential treatment by their parents during their lifetime.

Being a Trustee involves a lot of responsibility. Lucy and Claire were under a duty to manage the Trust efficiently and to make sure that any decisions they made were for the benefit of, and in the best interests of, all three siblings.

However, as Trustees, Lucy and Claire allowed money from the Trust Fund to be used to carry out renovations to the property before then selling the property to Claire at under the market value.

Nicola was concerned that she was not being treated fairly; and that she was not being kept aware of the decisions being made by Lucy and Claire. She was also concerned that Lucy had used some of the Trust Fund as her own money to pay off her debts.

As a result of her concerns, Nicola asked Lucy and Claire for an explanation as to the decisions they had made and for a copy of the trust accounts. Lucy and Claire ignored Nicola’s requests so Nicola sought legal advice.

In a scenario like this, there are a number of steps that Nicola could take and the best option would depend on all of the circumstances. It is always preferable to attempt to resolve disputes via correspondence and negotiation. This could include asking a trustee to take professional advice so they have a better understanding of what is expected of them; asking them to meet with you and your legal advisor to discuss any concerns; or going to mediation.

Should the need to take the matter to Court arise, Nicola could ask the Court to direct the trustees to handover the trust accounts or any documents they have been withholding; to remove or replace a trustee or to make the trustee pay back any financial loss to the trust.