Trustees of a Life Interest trust hold a portfolio of investments and pay the income to the life tenant. The trustees have, over several years, additionally made distributions of capital to the life tenant. Those transactions are not authorised by the trust deed. Nobody has been able to produce any documentation of the parties’ agreement to such transactions.
The trust capital, on death of the life tenant, goes to whoever are the trustees at the date of death. There have already been some changes to the trustees. Would the trustees responsible for making such distributions have any exposure to future trustees?
It would be a very unusual trust for the trust fund to vest absolutely in the trustees for the time being upon the termination of the trust.
Leaving aside the question of the identity of the capital beneficiaries, in the absence of any provision permitting a distribution of capital to the life tenant, there has been a breach of trust and the trustees who made each such distribution are liable to restore the trust fund to the extent of those distributions.
It is open to those now entitled to capital to waive those breaches, but they are not obliged to do so.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals