Mis-Trust in a Trustee?

As a beneficiary of a trust, you place significant trust in the trustee to act in your best interest and manage the trust assets responsibly. But what happens if, when the trust ends or during the trust period, you suspect that the trustee might have been acting incorrectly? This is a case study of a successful claim against a trustee in a recent case we handled involving the mismanagement of trust funds and their misappropriation by the trustees.

Why the beneficiary came to us

Our client, who was the beneficiary, received the trust funds upon reaching the age of 25. She was surprised to see considerable monthly payments to the trustees for “maintenance” expenses included in the trust accounts. She thought the trustees were also acting as her guardians.

Concerned by the significant value of funds taken from the trust without her knowledge, she instructed us to investigate. Our findings revealed that:

• The trust should have ended on her 21st birthday.

• The trustees incorrectly extended the trust for an additional four years, believing it was in her best interest, albeit without her consultation and contrary to the trust provisions.
• The trustees were not her legal guardians, and even if they were, they could not charge the trust “maintenance” fees for taking on this role.
• The trustees failed to invest funds properly. The trustees retained these funds to cover the incorrectly charged maintenance payments.

This mismanagement resulted in significant trust funds being spent that should not have been, leading to a breach of trust. Our client suffered a loss of investment opportunities, including missing out on purchasing a property during the lower interest rates seen in 2020 and 2021. The trustees were not professionals, but that did not excuse them from taking funds they should not have and failing to manage the trust correctly.

How We Helped

When we discovered the serious breach of trust, we provided a formal pre-action letter to the trustees outlining the mismanagement of the trust fund and their breach of fiduciary duties. The trustees sought legal advice, and we successfully resolved the matter before court proceedings, saving time, expense, and stress for our client.
Within just six months of being instructed to investigate the matter, we achieved a successful settlement. The trustees agreed to pay our client £65,000 to repay the misappropriated trust monies and her legal fees.

How to Know if a Trustee is Acting Correctly

A trustee must:

• Act in the best interests of the trust and the beneficiary.
• Take control of and preserve trust property, which may require investment.
• Keep a record of investments and monitor any investment manager.
• Exercise such care and skill as is reasonable in the circumstances.
• Not profit from the trust.
• Act unanimously if there is more than one trustee, unless the trust deed explicitly allows majority decisions.
• Disclose information to the beneficiary.
• Keep trust accounts and provide these to the beneficiary upon request.
• Comply with regulatory obligations, for example, to HMRC.

If you are a beneficiary, it is always sensible to ask trustees to provide regular accounts so you have transparency about the trust assets and what the trustees are doing. Check the accounts annually to spot any issues early on and avoid potential years of trust mismanagement.

If you have concerns that a trustee is not fulfilling their duties or is misappropriating funds contact the friendly team at Burt Brill & Cardens today. Call us on 01273 604 123, email us at enquire@bbc-law.co.uk or make an enquiry.

Conclusion

Trustees hold a significant responsibility in managing trust assets and acting in the best interests of the beneficiaries. When trustees fail to fulfil their duties, it can lead to serious consequences, including financial loss and missed opportunities for the beneficiaries. Beneficiaries must remain vigilant and request regular accounts to ensure transparency and proper management of the trust. If you suspect any mismanagement or breach of trust, seeking legal advice promptly can help address the issue and protect your interests. Our team is here to support you in navigating these complex situations and ensuring that trustees are held accountable for their actions.

For an initial call or consultation call us on 01273 604 123, email us at enquire@bbc-law.co.uk or make an enquiry.