Trustee and self dealing/conflict of interest

Trusts Discussion
1

I am dealing with an estate of a single man who left everything to his minor child at 25. The main asset is a property and around £10k in cash in addition to some pension death benefits which fall outside the estate.

The deceased was not in a relationship with his daughter’s mother at date of death but appointed her as trustee of the estate. However, he appointed his brother and best friend as executors.

This was a deathbed will and there is considerable acrimony between the Executors, and the Trustee. The Executors are concerned that the Trustee will not act appropriately or in the best interests of the beneficiary based on historic behaviour.

Probate has been obtained (upon removal of a caveat lodged by the Trustee) and there is now a dispute regarding the property. The Executors wish to sell the property based on apparent verbal wishes of the deceased before his death. The Trustee wishes to retain the property for her daughter and has indicated that she intends to live in it with her daughter. She has indicated that she is not prepared to pay any rent to the trust to live there.

A round table meeting was held recently with my clients, the trustee and her legal representative and a suggestion was made that in an attempt to resolve the matter, a neutral and/or professional trustee be appointed to oversee the actions of the Trustee appointed under the terms of the will. Not surprisingly, the Trustee was unhappy with this suggestion, and has since de-instructed her own solicitor and I am now in the position of dealing with her directly.

Would the Trustee be self dealing if she refuses to pay rent to live in the property, or would this be counteracted by the fact that she is the mother of the beneficiary who is a minor and cannot live there without a parent?

The other issue is, whilst my clients are concerned about the motives of the Trustee, they have a duty to consult with her as Trustee and cannot apply for her removal on the grounds of what they suspect may happen in the future.

I am minded to obtain counsel’s opinion but given the modest liquid assets in the estate, I am reluctant to incur unnecessary costs if this is a battle which is not really for my clients to have. I have advised them of their duty to remain neutral.

I would be grateful for any guidance or views/experiences of similar circumstances.

Rosemary Johns
Birchall Blackburn Law

2

How old is the beneficiary?

Sue Howard
Talbots Law

3

I don’t think it is the role of the executors to police the actions of the trustee, who was appointed by the deceased. Their role is to get in the assets and transfer them to the trustee and they cannot refuse to do so on the basis of what they think might happen in future. However, when they transfer the property they should arrange to enter a form A restriction. The question about rent-free occupation is a difficult one, but it is a question that, happily, need not concern the executors.

Paul Davies
Clarke Willmott LLP

4

Thank you for your reply. She is 10 years old.

Rosemary Johns
Birchall Blackburn Law