Trustees: What Is A Lien?

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A right to keep possession of property belonging to another person until a debt owed by that person is discharged.
Isle of Man Finance and Banking

What is a lien?

A right to keep possession of property belonging to another person until a debt owed by that person is discharged.

A trustee has the right to be indemnified against proper trust expenses out of the assets of the trust.

A trustee has a lien over the trust fund to secure their right to be indemnified.

When it is important?

In the event of:

  • An appointment to a beneficiary
  • A change in trustee
  • An insolvent trust
  • Contingent liabilities arising

Trustees Rights

  • Reimbursement of costs
  • Exoneration for any liabilities
  • Realisation of assets
  • Retention of trust fund

Important considerations

When a trustee enters into a contract with a third party it is personally liable on that contract unless it contains a term that excludes personal liability.

Where a trustee decides to retain trust assets, it is advisable that they record the exact terms and conditions on which they retain those assets, for the benefit of all parties

A trustee is not automatically entitled to retain the whole trust fund. If the maximum liability is known, a trustee can retain that maximum amount; if the maximum liability is unknown, a trustee should retain enough to cover an amount calculated on reasonable assumptions.

Originally published 10 June, 2020

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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