I acted for two trustees threatened with an application for removal due to alleged breaches of their duties. My clients were two of three trustees, and the claim against them was brought by their third co-trustee, the surviving widow of the deceased.
The deceased was a successful, self-made businessman who had generated significant income by providing services to the construction industry. He had three children with his first wife. That marriage ended in divorce, and he remarried and had two further children from the second marriage.
My clients worked closely with the deceased over many years and regarded him as a dear friend as well as a colleague. The deceased had made them both aware that his clear wish was for all of his children to be treated fairly when he passed away. He explained that this was why he was appointing them as trustees alongside his second wife. In addition to their usual duties as trustees, my clients felt a strong moral obligation to observe and uphold the wishes of their friend.
Under his will, the deceased's widow received all personal items and his share of the marital home. The will created a nil rate trust; the beneficiaries were the widow and the five children. This was made for tax saving reasons. The will created a further trust of the residuary estate.
The residue being the estate remaining after the other legacies and debts have been satisfied. The residue trust gave the trustees complete discretion and wide-ranging powers to make capital payments to the widow or to lend capital sums to her. Following the deceased's death, the nil rate trust was appointed into the residue trust as the will's provisions allowed.
In addition to the power to distribute/loan capital sums to the widow, the trustees were to pay the income of the residue trust to the widow during her lifetime. Upon her death, the residue trust was to be distributed equally between such children who attained the age of 25 years, i.e. the remaindermen.
The widow wanted my clients to retire as trustees. She alleged that they had acted in breach of their obligations and that unless they retired, voluntarily proceedings would be issued to seek their removal formally. She suggested as an alternative to removal that the trustees, on a unified basis, exercise their discretion to partition the trust (i.e. to bring the trust to an end and distribute the assets between the life tenant and the remaindermen).
The widow alleged that my clients had given priority to the remaindermen (i.e. the children) at her expense (as the life tenant). She also alleged that they had failed to respond to correspondence and had not reviewed investment arrangements.
A strong response and supporting documentation were sent to the widow's detailed letter of claim. As a result of that correspondence, the widow agreed to attend mediation to seek to resolve matters amicably.
To assist negotiations between the parties, an actuary was jointly instructed to produce a calculation of the apportionment of the Residue Trust between the life tenant and the remaindermen.
The parties attended mediation and were able to achieve an amicable resolution. This early settlement was made possible by obtaining full information from my clients at the outset to fully understand their position and make that clear to their opponent. All parties entered into the spirit of the mediation process and as a result, were able to achieve a solution that was workable for all.
If you believe you may have a trust dispute, please contact us on 01926 886688 for a no-obligation initial conversation. We would be happy to hear from you and hope that we can be of assistance at this difficult time.