Speak to a specialist solicitor at our law firm in North Yorkshire.
The rights of a beneficiary with concerns about a trustee
If you are the beneficiary of a trust and you are dissatisfied about the way in which an appointed trustee is acting, then it is important for you to understand your options for holding them to account.
Trustee and beneficiary: What you need to know if you have concerns
Your concerns may relate to the mismanagement of trust assets, the preferential treatment being shown to other beneficiaries, the unlawful disposal of trust property, the unacceptable dissipation of trust funds or even the suspected misappropriation of trust income.
There are a number of steps that you can take to have your concerns about a trustee addressed. These range from asking them to explain their actions and provide certain information, to applying to the court to have them forcibly removed from their position and replaced with someone else.
However, it is vital that you consider your options carefully and take specialist legal advice in order to achieve the best outcome and prevent a disagreement escalating into a formal dispute.
Can a beneficiary be a trustee?
Yes, a beneficiary could be a trustee. But check there is no conflict of interest as this could lead to concerns and disputes.
Duties of trustees
Trustees must comply with a range of duties, some of which will be set out in the document in which they were appointed (known as the trust deed) and some of which are automatically imposed through laws passed by the Government.
As a general rule, a trustee must:
- Act in accordance with the terms of the trust and follow any specific orders that they have been given;
- Ensure that all trustee decisions are made unanimously, unless the trust deed provides otherwise;
- Keep clear and accurate accounts and records relating to trust business and ensure that copies of these are made available to any beneficiary who requests them;
- Always put the interests of the trust first and show honesty, integrity and loyalty to the beneficiaries they have been appointed to protect;
- Treat all beneficiaries equally by acting impartially and without bias – a trustee must not do anything which has the effect of promoting the interests of one beneficiary at the expense of another and must balance any competing interests that exist; and
- Ensure that, while managing the trust to provide an income for the beneficiaries, care is also taken to preserve the capital value of the assets over which they have control.
Rights of beneficiaries
As a beneficiary, you have the right to expect appointed trustees to comply with their duties and to ask questions of them if you have reasonable cause to believe that something may be wrong.
You are not entitled to be consulted on every decision that is taken, but you are within your rights to ask why certain decisions have been made and to carry out checks and request key information in order to ensure that the trust is being properly managed and administered and that your interests are being fully respected.
Where no breach of duty has occurred, there may be nothing that you can do formally to address an issue that you are unhappy about. However, it may be possible to open up a dialogue with the trustees in which your concerns can be discussed and efforts made to find a way forward that is acceptable for everyone involved.
Where a breach of trust is established, you will normally have six years from the date of the breach in which to issue court proceedings to obtain redress. Sometimes different time limits apply, for example where the breach was concealed, if an affected beneficiary is under the age of 18, or where you believe a trustee is guilty of fraud.
Trustee and beneficiaries: options where a breach of trust has occurred
Where there is evidence to show that a trustee has acted in breach of their duties, or is otherwise unfit to continue in their role, then there are a number of steps that you could take.
These include asking the trustee to:
- Step down so that they can be replaced by somebody more suitable, like a lawyer or an accountant;
- Take professional advice so that they have a better understanding of what is expected of them and so they can be supported in carrying out their role.
You can also ask the other trustees to:
- Collectively agree to meet with you and your legal representative in order to discuss your concerns and the possible means by which they could be allayed;
- Collectively agree to the appointment of a mediator who can work with you to try to find an acceptable way forward and reduce ongoing tensions.
Finally, you could aks the court to:
- Give directions about how a particular issue should be addressed and any steps the trustees must take to comply with their duties in the future;
- Hold a trustee personally liable to recompense the trust (and by implication the beneficiaries) for any financial losses that they have caused; and
- Formally remove a trustee and appoint an acceptable replacement.
The best option for you will depend on the circumstances, whether you have the support of the other beneficiaries, and the position the trustees elect to take as a group.
It will also be influenced by whether there is any element of dishonesty or unreasonable behaviour alleged. Trustees can sometimes escape liability (in whole or in part) where they can show that everything they have done has been above board and is capable of justification, or where their actions have been specifically sanctioned through beneficiary consent.
How we can help
We are dispute resolution experts with experience in helping both beneficiaries and trustees to resolve their differences. We are skilled negotiators with a proven track record in keeping trust disputes out of court and in using alternative dispute resolution methods, like mediation. We are also accomplished litigators who can provide first class representation should the need to take a matter to court arise.
Need more information?
To find out more, please contact a member of our Dispute Resolution team in York on 01904 624185.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
