Trust disputes

Trust disputes can devastate family relationships and deplete trust assets if not handled properly. Charity trustee disputes are also common.

Whether you're a trustee facing challenges to your decisions, are involved in a legal dispute with co-trustees or are a beneficiary concerned about trust management, we have an experienced and specialist team to protect your interests and seek the right resolution.

Family trust disputes

When family trust disputes arise, causes include :-

• Breach of trustee duties - trustees failing to act in beneficiaries' best interests or exceeding their powers.

• Family dynamics - death, divorce, or financial pressure can strain previously stable relationships and expose underlying tensions in how trusts are managed. Poor communication frequently exacerbates these issues, with beneficiaries feeling excluded from important decisions or trustees failing to explain their reasoning adequately.

• Investment disputes - challenges to investment decisions or strategy.

• Trust administration - conflicts over day-to-day management and costs. Generational differences in expectations about trust management and distribution can create friction, especially in long-running family trusts where younger beneficiaries may have different needs or views from those originally envisaged.

• Removal of trustees - applications to replace unco-operative or unsuitable trustees due to breach of trustee duties and/or negligence.

• Beneficiary disputes - conflicts between beneficiaries about distributions or trust management,

Trustee duties and breaches

Powers and duties of trustees are likely to be included in any comprehensive and well drafted trust deed. These will be the starting point in assessing trustee conduct. However, statutory duties and case law will still be relevant. These legal duties are fiduciary and include duties to :-

• Act in best interests - putting beneficiaries' interests first in all decisions

• Exercise duty of care - demonstrating reasonable skill and care in trust administration. The standard expected of a professional trustee, whether lawyer, accountant, IFA or other, is higher.

• Act impartially - treat different classes of beneficiaries fairly

• Act within powers - make appropriate decisions including investment decisions within powers

• Comply with duty to account - maintain proper records and provide information.

Express powers in the trust deed must be exercised in accordance with both the trust deed constraints and underlying fiduciary obligations. Where the trust deed is silent, statutory and common law duties fill the gaps.Even broad discretionary powers must be exercised in line with fiduciary duties

Beach of trustee duties - examples

• Self-dealing - trustees benefiting from their position.

• Investment failures - making inappropriate or risky investments.

• Bias - favouring certain beneficiaries over others.

• Inaction - failing to make decisions or take necessary steps.

• Poor record-keeping - inadequate accounting or documentation.

• Unauthorised delegation - leaving decisions to others.

• Exceeding powers - acting beyond trust deed authority.

• Conflict of interest

Charity trust disputes

Charity trustee disputes present unique challenges due to their public interest element and regulatory oversight from the Charity Commission. Most commonly, they arise from disagreements over charitable purposes, investment decisions, or conflicts between trustees about strategic direction.

Governance issues form another significant category of dispute, often involving allegations that certain trustees are dominating decision-making or failing to declare conflicts of interest. In membership charities, disputes can also arise between the trustees and members about the direction of the charity or the proper exercise of members' rights. Charity related trustee disputes we advise on include :-

• Strategic conflicts - disagreements over charity's direction or major decisions.

• Financial management - disputes about investment policies or inappropriate use of charitable funds.

• Governance breaches - failure to follow proper procedures or constitutional requirements.

• Conflicts of interest - trustees failing to declare or manage personal interests.

• External contracts - conflicts over significant third-party arrangements or partnerships.

The public nature of charitable trusts means that disputes can quickly escalate beyond internal disagreement to involve stakeholders, beneficiaries, or the media. This requires swift and careful handling to protect the charity's reputation and effectiveness.

Charity Commission

The Commission's powers to intervene are substantial but used selectively. They will typically become involved in cases of serious financial mismanagement, significant risks to charitable assets, or fundamental breakdowns in governance.

When the Commission does intervene, their powers are extensive. They can open statutory inquiries, appoint interim managers to temporarily run charities, freeze bank accounts to protect assets, and suspend or remove trustees in cases of misconduct. They also have authority to direct specific actions to address identified issues and can require detailed accounts and records for investigation purposes.

How we can help

Our team works with both trustees and beneficiaries and in the case of charities, defending trustees under investigation and also often we are instructed by the Charity. Ways in which we can help include :-

• Strategic guidance - he help trustees navigate complex decisions, maintain proper documentation and identify potential issues and preventive measures.

• Regulatory compliance - guidance on meeting legal and regulatory obligations.

• Information and evidence gathering - obtaining proper disclosure and questioning trustee actions or distributions.

• Breach of trustee duty claims - pursuing compensation for losses from breaches.

• Removal applications - advising on the trustee removal process.

• Defence against claims - robust representation for trustees facing allegations.

Contact our trust disputes team for an initial discussion about your situation. We can help evaluate your options and recommend the best path forward.