Resolving a dispute about a trust fund

Once thought of as a device only for the rich and famous, trust funds are now routinely used by ordinary families to protect assets for a loved one in a tax-efficient manner.

Although useful, trust funds can be complex mechanisms and disputes can and do occur about how they are run or about who benefits from them. Jim McGarrity, Partner and Solicitor-Advocate in the Private Client Services team at Geoffrey Leaver Solicitors, outlines what a trust fund is, how disputes over trust funds can emerge, and how a solicitor can help you resolve them.

What is a trust fund?

A trust fund, also known as a trust, is an arrangement where someone (the settlor) places their assets and chooses one or more individuals to have control over the funds in this trust for the benefit of the named beneficiaries.

A trust fund can be set up so that the assets pass to the beneficiaries while the settlor is still alive or after they have passed away through a trust in their will.

The beneficiary of a trust fund may be a child, for example, who the settlor wants to have access to the assets when they reach a certain age, when they want to go to college, or want to buy a house. Or they may be someone who is mentally incapacitated and not capable of taking financial responsibility for the money the settlor wishes to leave them.

The settlor outlines who the trust’s assets should go to and how they should be used in a legally binding document called a ‘trust deed’. Trustees are appointed to ensure that the wishes the settlor has outlined in the trust deed are carried out.

The amount of discretion a trustee has will depend on the sort of trust that is set up and the level of detail the settlor has included in the instructions they have given the trustees in the trust deed.

What sort of disputes can arise over trust funds?

Disputes over trust funds can arise in a number of different ways and may occur due to concerns regarding costs, decisions about how the trust fund is being utilised, or the value or distribution of the trust assets.

Common disputes include:

  • a beneficiary being concerned about how a trustee is managing the trust or distributing the assets, for example suspecting negligence, mismanagement or fraud, or that the trustee is unjustifiably favouring another beneficiary;
  • trustees failing to provide beneficiaries with information about the trust fund that they are legally obliged to impart;
  • trustees falling out with each other about how the trust should be run or how the assets are distributed;
  • differences over the interpretation of a trust document, perhaps because it is badly drafted, too vague or contains mistakes;
  • trustees being permanently badgered for information or unjustified pay-outs by beneficiaries;
  • a trustee believing that a fellow trustee is defrauding the trust fund or committing a breach of trust;
  • beneficiaries disagreeing about the amounts of assets they have been allotted, or feeling that one of their number should not be entitled to what they are receiving;
  • someone who was perhaps financially dependent on the settlor feeling they were unfairly left out of the trust;
  • claims that the settlor was not mentally capable of setting up the trust, set it up under undue influence, or set it up on the basis of negligent legal or tax advice; and
  • the trust not allowing creditors or financial dependents to claim assets from an estate that they think they are entitled to.

How can a solicitor help?

Whether you are a trustee, a beneficiary, or someone who feels they should be entitled to benefit from the assets in the trust fund, our experienced wills and trust solicitors will explore the problem you are having and work hard to find a solution.

We can help negotiate with troublesome trustees or beneficiaries to iron out any problems, without the matter having to go to court. We can also take the lead in removing or replacing a negligent or fraudulent trustee, involving the police if theft or fraud is suspected, obtaining any information to which you are entitled, clawing back money that has been wrongly distributed or taken, or launching a legal claim for negligence.

Whatever the problem we can help guide you through the dispute resolution process. We will handle the required negotiations, sort out any necessary paperwork, provide legal advice and representation if your case has to go to court, and always work with the aim of getting the trust working again in the manner that the settlor would have wished.

For further information, please contact Jim McGarrity on 01908 689331 or via email at jmcgarrity@geoffreyleaver.com.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

 

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Jim McGarrity, Partner

Jim McGarrity | Partner

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