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A trust can be described as a relationship created at the direction of an individual, in which one or more persons hold the individual’s property subject to certain duties to use and protect it for the benefit of others.
The person who creates the trust is the settlor. The person who holds the property for another’s benefit is the trustee and the person who benefits from the trust is the beneficiary.
A trustee’s duties and responsibilities are governed principally by the Trustee Act 1925 and the Trustee Act 2000 as well as the trust deed. A fiduciary relationship exists, which means that the trustee must act in good faith, with strict honesty and due regard to protect and serve the interests of the beneficiaries. The terms of the trust may be set out in a will or a settlement during the lifetime of the settlor.
A common example is a life interest trust where one beneficiary (the life tenant) is entitled to the income of the trust fund during their lifetime, while another (the remainderman) is ultimately entitled to the capital on the death of the life tenant.
Difficulties can arise when beneficiaries of a trust may have different requirements or expectations and trustees can get caught either between the competing interests of different beneficiaries or in relation to their duties and responsibilities.
Trustees are under a duty to exercise such skill and care as is reasonable in all the circumstances (having regard to any special knowledge or experience he/she has).
In deciding what investment strategy to pursue, trustees must have regard to the impact on both the life tenant and the remainderman, taking into account the circumstances of the trust and the beneficiaries.
If the beneficiary of a trust believes that the trustee has acted in breach of trust then it may be possible to pursue a claim. They must have suffered financial loss as a result and the claim must be brought within 6 years of the date of knowledge of the breach (or 12 years if the case involves a deceased’s estate).
Trust disputes can also arise in relation to property:-
Secret Trust – arises if someone making a Will (a testator) makes a gift relying on a promise by the person to whom the gift is made, to hold it for a third party who is not named in the Will. It is also possible for a half secret trust to arise where the testator leaves a bequest to someone “for the purposes for which I have told them”.
Constructive Trust – very often there can be an agreement or understanding between two people that a property is to be in the name of one of them but is to be held for the other person’s benefit as well – if that person can show that they acted on that understanding to their detriment, then they may be able to establish an interest in the property.
Resulting Trust – if a direct financial contribution has been made to the property a trust may arise. This might be by paying mortgage instalments or by way of a direct contribution to the purchase price.
Section 14, Trusts of Land and Appointment of Trustees Act 1996 – if a financial interest in the property can be established, an application can be made to the court seeking a declaration about the nature and extent of that financial interest and if necessary for an order that the property be sold.
Proprietary Estoppel – this is an argument (not strictly under trust law) but one that is often advanced alongside a constructive trust claim, that a person has acted to their detriment in reliance on a promise. For example someone who worked on their parent’s farm all their life on the understanding that they would inherit it on a parent’s death may well have a claim in proprietary estoppel.
An initial discussion is free of charge and will help to outline the strength of your case and the most effective action to take.
One such action may involve utilising the services of an experienced, independent fiduciary who fully understands how a trustee should properly discharge their responsibilities and duties. Such an expert would undertake a review of the trustees actions, providing a report that would include recommendations as to how the dispute may be resolved. If such a course of action was considered appropriate, we are pleased to be able to recommend Keith Graham of Core Business Consultancy who has particular experience in this area of disputes.
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