Losses caused by trustees

Trustee mismanagement can take many forms, including:

• Misuse of funds: Using trust assets for personal gain or unauthorised purposes.
• Failure to invest properly: Neglecting to make prudent investments that safeguard and grow the trust’s assets.
• Delay or failure to distribute funds: Withholding funds owed to beneficiaries without a valid reason.
• Hiding or misplacing assets: Moving funds through complex transactions or failing to account for them.
• Conflicts of interest: Acting in a way that benefits the trustee at the expense of the beneficiaries.

When a trustee breaches their duty, the consequences can be far-reaching:

• Beneficiaries may lose access to crucial funds or assets.
• The trust’s value can diminish due to poor decisions or inaction.
• Family relationships often break down due to mistrust or disagreements about the trust’s administration.

To understand mismanagement, it’s essential to know what is required of a trustee. Trustees are bound by specific legal duties, including:

• Duty of care: Acting diligently and prudently when managing the trust.
• Duty of loyalty: Prioritising the beneficiaries’ interests above their own.
• Duty to account: Keeping clear, accurate records of all transactions and decisions.
• Duty to act fairly: Treating all beneficiaries fairly and without bias.

When a trustee fails to meet these obligations, it constitutes a breach of trust, and legal action may be required to rectify the situation.

Start by requesting transparency. Trustees are obligated to provide clear records of their actions, including financial statements and accounts. A formal written request for clarification can sometimes resolve minor issues.

If concerns persist, consulting a solicitor experienced in trust disputes is crucial. A solicitor can evaluate the situation, explain your legal rights, and recommend a tailored course of action.

You may formally request that the trustee provides a full account of the trust’s management, detailing all transactions and decisions. This step can uncover evidence of mismanagement or misconduct.

If the trustee has breached their duties, you can pursue a legal claim for compensation or seek to remove the trustee. This may involve:

1. Recovering Misappropriated Funds: If funds have been misused or stolen, they can often be traced and recovered.
2. Rectifying Poor Decisions: Courts can intervene to undo improper transactions or reinstate lost value.

• Removing the Trustee: If the trustee is unfit to continue, legal action can replace them with a more suitable party.

In urgent cases, immediate legal action may be necessary to protect trust assets. This includes:

1. Freezing injunctions: Preventing the trustee from moving or disposing of assets.
2. Search orders: Allowing access to documents or property to uncover evidence of wrongdoing.