A trustee is a position of great responsibility and should not be undertaken lightly. Trustees have a large number of obligations and duties which are set out in both the trust deed and also in law. Trustees should co-operate both with their fellow trustees and also the beneficiaries and should not use their powers unreasonably and should act in accordance with the terms of the trust deed.
What are a trustees duties?
A trustee must at all times act in the best interests of the trust. They must act with honesty, integrity and in good faith. They must act in accordance with the terms of the trust deed and to do otherwise which amount to a breach of trust. e.g. a trustee is not allowed to pay money out to anyone who is not named as a beneficiary of the trust, even if they think they are doing the right thing. Trustees must also ensure that there is no conflict between their interests and those of the trust e.g. selling trust assets to themselves at a price much lower than the market value. They should also act impartially between the beneficiaries and not prefer one over the other, unless the trust deed specially permits it.
Overall, it’s a pretty long list of obligations and so it can be quite easy for a trustee to fall foul of the rules and regulations whether deliberately or not.
What if a trustee is not acting properly?
If a rogue trustee is failing in their duties then either their fellow trustees or beneficiaries of the trust can request that a trustee voluntarily steps down. As long as there are enough trustees remaining then the trustee can simply retire or else they can appoint someone else in their place before stepping down.
If the trustee refuses to step down, then the first port of call is to check the trust document as that often contains express powers to remove trustees. As long as the trust document is followed, the rogue trustee cannot really object or complain.
If the trust document is silent about removing a trustee or there is a disagreement between the other trustees and beneficiaries as to whether they should be removed, then either the other trustees or beneficiaries can to apply to court to have them removed.
What grounds can a trustee be removed?
Just because there may be hostility between a trustee and the beneficiaries, this is not normally on its own enough to warrant them being removed. Given the decisions that trustees are expected to make, it’s quite common that not all the beneficiaries would be happy about a trustee’s decision and want them removed
There are several grounds which would justify a trustee being removed:
- Breach of trust – the trustee has failed to follow the terms of the trust document
- Death of a trustee – being a trustee is a personal role, it cannot be passed onto the deceased’ trustee’s executors
- Incapacity of a trustee – if they no longer have capacity to make decisions
- Absent trustee – if they fail to act as a trustee and fulfil their duties and obligations
- Un co-operative trustee – if they refuse to co-operate with other trustees or deal with legitimate enquiries from beneficiaries and provide them with information about the trust to which they are entitled
- Biased trustee – if a trustee is improperly favouring some beneficiaries over others
- Conflict of interest – if the trustees personal interests conflict with the interests of the trusts
- Overcharging – if a trustee is the trust excessive amounts for their services
- Failing to act properly – if a trustee makes poor investment decisions or is negligent in their actions
- Not exercising their discretion properly – the trustee ignores the settlor’s wishes completely or does not take into account other relevant information before exercising their discretion
Each case will turn on its individual facts so it’s important to take legal advice promptly if you have queries about removing trustees. We act for both beneficiaries and trustees in removal applications and also defend trustees who are facing such claims. We can ensure that you receive advice from specialists in trust disputes to ensure that there is minimal disruption to the running of the trust.