Trustees in the Firing Line

A person who was about to become a trustee wanted me to assure him that he was not taking any personal risk.  I told him, absolutely not.  Of course, I was joking.

Trustees know that if they are fraudulent, reckless or negligent then they can be pursued by the beneficiaries of the trust. But, sportingly, beneficiaries need to catch them first.

However, that is not the trustees only problem.  Consider the following:

- When you sue a person and they refuse to pay after you have got a judgment/court order the last resort is to make them bankrupt, but it is a little bit fiddly.

- When you sue a company, if it does not pay up, you threaten to wind it up.  This is surprisingly easy to do.

So what about a trust?  It is a separate legal entity, the sort of place that you put your money to try and shield it from other people e.g. your daughter’s layabout husband.  However, a trust cannot be wound up or made bankrupt. 

Fortunately, for the trust’s creditors they do not need to sue the trust, they only need to sue you, the trustee.  The good news is that you, as trustee, can rely on the trust to indemnify you against such a claim.  This is the bad news if the trust doesn’t have any money.

One solution is to have a company acting as a trustee.  Nevertheless, creditors can wind that company up and then pursue the directors if they have done a lousy job or made payments to one creditor (usually themselves or their families) in preference to another creditor.

Most people become a trustee at sometime in their life.  For instance, being the executor and trustee of another’s will.

Is it a mug’s game?  Well, no more than being a parent.

Trusts can have drama, intrigue and be a great source of entertainment in your declining years.





© Paul.Brennan 2016. All rights reserved.

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