Trustees play a pivotal role in managing trusts, ensuring that the assets within are handled according to the terms set out by the trust creator (Settlor).
Trustees have a fiduciary responsibility, meaning that they must act in the best interests of the beneficiaries. Unfortunately, breaches of trust can and do occur, leading to legal consequences and potentially harming the beneficiaries and the trust’s overall purpose. In this series of blogs, I will explore what constitutes a trustee breach, common examples, legal implications, and strategies for prevention.
What is a trustee breach?
A trustee breach occurs when a trustee fails to fulfill their duties, either intentionally or through negligence, violating their legal obligations under the trust agreement. The trustee is legally required to act in the best interests of the beneficiaries and to carry out the terms of the trust as outlined by the Settlor. If they deviate from these responsibilities, they can be held personally liable for any harm that results from the breach.
Common types of trustee breaches
There are several types of breaches a trustee can commit, including:
Failure to act in the best interests of beneficiaries: Trustees are required to prioritise the interests of the beneficiaries over their own. If a trustee acts in their own self-interest, such as by using trust assets for their personal benefit, this is considered a breach of their fiduciary duty.
Mismanagement of trust assets: Mismanagement involves improper handling of the trust’s assets, including making risky investments or failing to diversify the trust’s portfolio. Poor record-keeping and neglecting proper financial oversight also fall into this category.
Failure to administer the trust in a timely manner: Trustees are obligated to administer the trust promptly and in accordance with the terms set out in the trust document. Delaying distributions or failing to fulfil other obligations, such as filing tax returns, can result in breaches.
Conflict of interest: A trustee must avoid any situation where personal interests conflict with their duty to the trust. Engaging in transactions where they stand to personally benefit at the expense of the trust is a breach.
Failure to follow trust terms: A trustee must adhere strictly to the terms and conditions of the trust agreement. Any deviation from these terms, whether due to negligence or wilful actions, constitutes a breach of trust.
Comment
Trustees are entrusted with significant responsibilities and must act with the utmost integrity and care. Breaches of trust not only harm the beneficiaries but can also expose the trustee to legal consequences and potential financial liability.
If you are a trustee or a beneficiary of a trust and are experiencing challenges or require advice in a dispute to ensure the best interests of the trust and/or its beneficiaries are being met, we have considerable experience in these types of disputes and would be happy to discuss the circumstances with you.
How can we help?
Lesley Harrison is an Associate in our expert Dispute Resolution team, specialising in inheritance disputes and disputes over property.
If you are the beneficiary of a Trust and have reason to believe that the trustees are in breach of their duties and powers please contact Lesley or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.
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