What Can You Do If A Trustee Is Refusing To Exercise Their Discretion Under A Discretionary Trust?

Under a Discretionary Trust, the trustees can make certain decisions about how to use the Trust income and sometimes the capital. Depending upon what is said in the Trust deed, the trustees may also be able to decide which beneficiaries to make payments to, how often payments are made and any conditions to impose on the beneficiaries.

Discretionary Trusts are often used to put aside assets for a future need, such as for grandchildren or for beneficiaries who are not responsible enough to deal with money themselves. Given the nature of a Discretionary Trust, as a beneficiary, you are very much under the control of the trustees.

So what can you do if a trustee is unreasonably refusing to exercise their discretion under the Discretionary Trust?

There are a number of judicial decisions that offer some clarity as to what beneficiaries can do in such circumstances.

Harman J in Re Gestener Settlement [1953] Ch 672 confirmed that trustees are bound to consider whether or not to distribute and if so, to whom they should distribute. Harman J goes on to state that if the beneficiaries can show that the trustees have deliberately refused to consider exercising their discretion the beneficiary can procure the trustees removal.

Lord Reid in the case of Whishaw v Stephens [1970] AC 508 reinforced the decision reached by Harman J and confirmed that trustees have a fiduciary duty that “they cannot simply push aside”. They cannot simply refuse to consider whether their discretion ought to be exercised.

Lord Reid further went on to state that if a trustee declines to even consider a beneficiary’s request to exercise his power, the beneficiary may apply to the Court to have the trustee removed and an alternative trustee appointed in their place.

If you have any concerns about a trustee’s actions, it is important that you seek legal advice as soon as possible.