The Trust Document and Trustee's Duties

Trustees 'Need to KNow' Guides

This Trustees 'Need to KNow' Guide provides general guidance of the law at the date of publication. Specialist advice should also be sought.

Updated July 2020.

What is a trust?

A trust is an arrangement defined by law whereby an individual, or a group of people, are given legal title and responsibility for the ownership of assets for the benefit of some other person or group of people. It may be comprised of property, shares or just money.

How is a trust created?

A trust is ordinarily created in one of two ways:

  • by a deed of trust for a trust created during the lifetime (to take immediate effect) of the person or people giving assets to the trust; or 
  • by a will for a trust that is to be created on or shortly after the death of the person making the will. The individual (or individuals) giving assets to the trust is/are known as the settlor(s). 

What are a trustee’s duties? 

The unique concept of a trust is the separation of the legal ownership by the trustees and beneficial ownership by the beneficiaries. Trustees have duties of honesty, integrity, loyalty and good faith to the beneficiaries of the trust. The trustees must always act in the best interests of the beneficiaries. They must observe the terms of the trust, exercise reasonable care and ensure the correct distribution of assets, act impartially between the beneficiaries and provide certain information to the beneficiaries when asked to do so.

What should a trustee look for in the trust document? 

The trust document (whether by lifetime settlement or will) states who is responsible for looking after the gifted assets (the trustees) and who is to benefit (the beneficiaries) as well as any rules or conditions that they must comply with. The trustees have legal title to the assets in the trust and are responsible for administering the trust in accordance with its terms. The beneficiaries are able to benefit from the assets held in the trust. The trust document may also nominate a “protector” who is responsible for ensuring that the trustees operate the trust in accordance with its terms and the intent of the settlor. Trustees have various legal powers to administer a trust, the scope of which is set out in the trust. Some trusts are extremely prescriptive whereas other trusts allow the trustees to exercise their discretion on how best to allocate trust assets and income. 

What about worldwide assets?

Additional consideration needs to be given in relation to worldwide assets. Not all jurisdictions recognise trusts. Moreover, certain jurisdictions impose forced heirship rules and/or are subject to matrimonial regimes that require property to be dealt with in a particular way. These regimes expose a trust holding applicable assets to potential challenges. 

How can we help? 

We act for trustees, executors, personal representatives and for individuals claiming against estates, trustees or other parties. We also often advise on complex and cross-jurisdictional issues, and regularly work alongside other intermediaries based offshore. Our team is recognised for our expertise in this field by the legal directories: The Legal 500 and Chambers & Partners. If you have any questions arising from this Need to Know please do not hesitate to contact our Wills, Trusts and Inheritance Disputes Team.

Latest blogs & news

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The death of a loved one is an incredibly sad and difficult time for any family, and in the vast majority of cases those closest to the deceased are able to arrange an appropriate “send-off” which gives everyone the opportunity to pay their respects and say goodbye. Unfortunately however, there may be situations where the relevant parties cannot agree on the funeral arrangements, or what should happen to the deceased’s body. This blog considers who is legally responsible for deciding what happens to the body and how the Court has approached disputes in recent cases.

Proving Will Fraud or Forgery: Is There Evidence?

When a family member or loved one dies, sometimes the terms of their will, if they made one during their lifetime, can come as a surprise to those who survive them. For example the will might include unexpected beneficiaries, or certain beneficiaries might receive a greater or lesser share of the estate than others. Under the laws of England and Wales, a person has the freedom to leave their estate to whoever they choose and there is no legal obligation to provide for any particular family member or other individual. Therefore, whilst family members or individuals might regard the terms of the will as unfair or unexpected, the law will generally uphold the wishes of a testator set out in their will, if it has been validly made.

Is the pandemic the perfect storm for will challenges?

A will can be contested on the basis that it is invalid by relying on various grounds. It is fast becoming apparent that sadly the pandemic may have given rise to the perfect storm for will challenges on one or more of these grounds.

Claimants given costs boost in inheritance disputes – Hirachand v Hirachand

The Court of Appeal has recently handed down its judgment in the case of Hirachand v Hirachand, concerning an appeal against an order made in May 2020 in proceedings brought by Sheila Hirachand for provision from the estate of Navinchandra Hirachand, her late father, under the Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”).

Actor Terry Jones’ children challenge his Will - but does suffering from dementia mean you can’t make a valid Will?

Several stories have recently been published about the ‘legal battle’ commenced in the High Court relating to the estate of actor Terry Jones, who was well known and loved for his role in Monty Python and who died in January 2020. His adult children from his first marriage have reportedly commenced proceedings against their father’s estate and his second wife Anna Söderström (who is thought to be the main beneficiary of the estate), claiming that the Will their father made in 2016 is invalid because he lacked capacity when he made it. As a matter of law, a Will made by someone who lacks the required mental capacity at the time they made the Will is not valid. 
 

 

Why the date of death matters for creditors of insolvent estates

Death does not release an individual from their debts and liabilities, nor does it allow transactions made to loved ones to escape challenge. This is so regardless of whether the transactions were made with the intention to defraud creditors.

Spotlight on dementia: can you challenge a will despite the views of medical experts?

Alzheimer’s disease, the most common form of dementia, has been in the spotlight recently given a recent scientific breakthrough with the US approving the first new Alzheimer’s drug in 20 years. Light has also been shed on dementia and assessing testamentary capacity in the recent case of Hughes v Pritchard [2021] EWHC 1580 Ch. In this case, Mr Hughes, who suffered from moderately severe dementia was nevertheless deemed to have capacity at the time of amending his will by his GP, a view supported by a joint medical expert later instructed in the case. Despite this, his will was overturned by the judge on the basis that he did not have the requisite capacity to make the changes to his previous will, which were much more significant than the medical professionals, and indeed Mr Hughes, had appreciated.

When does the clock start ticking on trustees’ negligence?

Matthew & Others v Sedman & Others [2021] UKSC 19 

The Supreme Court recently handed down a judgment dealing with time limits in a “midnight deadline” case. The claim was brought by new trustees and beneficiaries of a will trust against the former professional trustees. The claim involved allegations of negligence against the former trustees, along with breach of trust and breach of contract.

Looking out for financial abuse of the vulnerable

 Financial abuse of older and vulnerable adults is sadly becoming more prevalent

You gotta’ have faith…in ADR

My previous blog examined whether Kenny Goss, the ex-partner of George Michael, may be entitled to a provision from the late singer’s estate, notwithstanding the fact that their relationship had broken down in 2009 (seven years prior to Mr Michael’s death). It was reported at the time that Mr Goss was seeking an award of £15,000 per month on the basis that Mr Michael had been financially maintaining Mr Goss at the time of his death. Pursuant to the Inheritance (Provision for Family and Dependants) Act 1975, Mr Goss made an application for reasonable financial provision from Mr Michael’s estate because he had not been left anything in the singer’s will.

Inheritance claims by adult children

In recent years the courts have seen a significant number of claims under the 1975 Act bought by adult children. This week it has been widely reported that the two adult daughters of Tony Shearer, a high profile banker and finance governor of a well-known public school, have failed in their attempt to bring a claim against their late father’s £2.2 million estate. Mr Shearer made no provision in his estate for his daughters leaving the majority of his wealth to his second wife.

What is required to show dishonesty in the case of a professional trustee?

Examining the impact of Sofer v Swiss Independent Trustees SA on practitioners in England and Wales. 

This article was first published by STEP, December 2020: Katherine Pymont, 'Moments of Truth', Trust Quarterly Review (Vol18 Iss4), pp.36-41

Whoever thought Will forgery would be easy?

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Contentious Trust and Probate Quarterly Round-Up: Q4 2020

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Beneficiaries in the dark: what can you do to obtain the information you need?

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Leaving a legacy to charity: avoiding a will construction claim

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When can a Will be rectified? Barrett v Hammond (2020)

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Did George Michael have the freedom to exclude his ex-partner from his will?

It has been alleged that the ex-partner of George Michael, Kenny Goss, may be considering issuing a claim against the singer’s estate. Goss was excluded from the singer’s Will but purportedly claims he is entitled to a monthly allowance of £15,000 as the singer provided this monthly allowance to him before their relationship broke down in 2009.

Highly publicised matters arising in relation to the administration of the late Steve Bing’s estate in the US give rise to some interesting legal issues

Before the Family Law Reform Act 1969 (“the 1969 Act”) came into force on 1 September 1970, the common law rules of construction that a child is legitimate only if the child was born or conceived in wedlock applied when dealing with trust deeds or wills. The 1969 Act is not retrospective so difficulties may still arise in relation to trust deeds or wills settled/executed prior to that time.

Think twice: might the estate be insolvent?

This blog focuses on two practical considerations that should be borne in mind when dealing with an estate where there are any suspicions that the value of the assets when realised may be insufficient to meet all debts and liabilities in full.

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