ABSTRACT

Events leading to hostility between trustees and beneficiaries are often similar. The following is a typical situation:

  • The settlor places their fortune in a discretionary trust for the benefit of their children, grandchildren and further issue. They make it clear in their letter of wishes that they do not wish the trustees to fund extravagant lifestyles for the children.
  • The settlor dies and their children bring pressure on the trustees to make substantial distributions to them. The trustees refuse.
  • The children turn against the trustees and allege overpayment by the trustees of their costs. The children only agree to correspond with the trustees via their solicitors. The children's solicitors request the trustees stand down in favour of the children on the grounds that they may be in breach of trust through overcharging and that, in any event, there is such friction and hostility between the trustees and the children that the trusts cannot be executed properly, thus jeopardising the welfare of the beneficiaries. The trustees refuse to resign.
  • The court is required to balance the wishes of the settlor (although not binding) and any perceived risk to the interests of future generations in the trust fund against the ongoing difficulties that exist between the trustees and the children, and the potential impact that has on the proper execution of the trusts and the welfare of the beneficiaries.

This article considers the often difficult question, first for trustees and second for the court, as to whether or not trustees should be removed in circumstances where they are honouring the wishes of the settlor against the requests of the beneficiaries, the beneficiaries then turning against the trustees, alleging breach of trust and generally making the proper administration of the trust difficult to achieve.

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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.