Protection of Trustees Flashcards
What measures can a trustee encourage a settlor to put in place for their own protection?
Requiring settlor to include an ouster or exemption clause in the trust instrument - e.g. removing duties that arise when a trust holds a majority shareholding in a company
Taking out trustee liability insurance
How are exemption and ouster clauses different?
Exemption - duty still exists but trustees will be protected from personal liability if they breach it - but beneficiaries ca pursue action e.g. proprietary claim
Ouster - removes a duty altogether
What can trustee liability insurance cover?
Protect against liability for negligence but not fraudulent breaches of trust
Often possible to have insurance premiums paid out of the trust fund as an expense of the trust
How can trustees seek legal advice on interpretation of trust terms?
Seeking court directions - won’t be liable even if there is a subsequent claim from a beneficiary
Applying to High Court under AJA to rely on Counsel’s opinion - Written legal opinion from a barrister / solicitor with 10 years experience - Apply for High Court Authorisation to rely on that legal opinion
Surrendering their discretion to the court - exception / specific
Obtaining beneficiary consent - only possible if Bs are known / locatable / over 18. Full information must be provided
What options are available to trustees who are unable to identify or locate beneficiaries?
Benjamin order
Notice under s27 TA
Retaining a fund in case
Paying money into court
Wrongful distribution insurance
Seeking an indemnity from the beneficiaries to whom they do distribute
How do Benjamin orders work?
Court order permitting trustees to distribute on the basis of a particular assumption
Trustees must make full enquiries to attempt to establish true position and show no reasonable prospect of knowing where B is without disproportionate expense
B can make a claim against the other Bs to whom property was distributed
How does a s27 notice work?
Ts publish a notice of intention to distribute to known beneficiaries two months after the advertisment
Notice must go in
London Gazette
A newspaper circulating in the area in which any land held on trust is situated and any other newspapers appropriate
If a Benjamin Order / S27 notice is in place, what claims can beneficiaries coming forward later make?
T is protected from any personal claims
If all property distributed - only option will be for a beneficiary to obtain a proprietary or personal claim against recipient of the property
If not fully distributed can claim
When is having a retained fund most useful?
Ts can identify all beneficiaries but not locate them all.
Does mean extensive ongoing duties and quite risky as still could mean that wrong amount is retained
When would payment into court be used?
Option of last resort when all realistic options for tracing beneficiaries has failed
What are the benefits and risks of seeking an indemnity from beneficiaries?
Quicker and cheaper than other options and avoids the trust fund being tied up on trust for a long period of time
Riskier - only worth anything if the person giving the indemnity is able to pay
