PROTECTION OF PRS/TRUSTEES

TRUSTEES/PRS LIABILITY

Personal representatives have same duties and liabilities as trustees and can use same protection mechanisms

REFUSAL TO ACT

Individual can refuse to take role of trustee/PR to avoid personal liability

OUSTER CLAUSE

Removes a trustee duty entirely but cannot remove all duties or trust becomes invalid; used sparingly

EXEMPTION CLAUSE

Limits/excludes trustee personal liability but duty still exists; cannot exclude liability for fraud

TRUSTEE INSURANCE

Insurance covering trustee liability for negligence (not fraud); premiums usually paid from trust fund

LEGAL ADVICE

Trustees may rely on advice but remain liable if advice is wrong

COURT DIRECTIONS

Trustees apply to court for guidance; if followed → full protection from liability

S48 AJA 1985 APPLICATION

Trustees obtain written legal opinion and court approval to rely on it; cheaper than full court directions

SURRENDER OF DISCRETION

Trustees ask court to make decision where deadlock/conflict; only for specific issue

BENEFICIARY CONSENT

Trustees protected if all beneficiaries give fully informed consent

FULLY INFORMED CONSENT

Requires all beneficiaries to be known, adult, of sound mind, and given full information

PARTIAL CONSENT

Only protects against claims from consenting beneficiaries

MISSING BENEFICIARIES RISK

Trustees liable if they distribute incorrectly and missing beneficiaries later claim

BENJAMIN ORDER

Court allows distribution based on assumption (e.g. missing beneficiary presumed dead); protects trustees

REQUIREMENT FOR BENJAMIN ORDER

Trustees must make full enquiries and show no reasonable prospect of finding beneficiary

EFFECT OF BENJAMIN ORDER

Trustees protected but beneficiary can claim against recipients

BENJAMIN ORDER

Court order allowing distribution based on assumption (usually that missing beneficiary is dead)

WHEN TO USE BENJAMIN ORDER

Where a beneficiary is known to exist but cannot be located (missing beneficiary)

BENJAMIN REQUIREMENT

Trustees must show full enquiries made and no reasonable prospect of finding beneficiary

BENJAMIN EFFECT

Trustees protected even if assumption is wrong

BENJAMIN LIMIT

Beneficiary can still claim against recipients

S27 TA 1925 NOTICE

Advertisement giving unknown beneficiaries 2 months to come forward before distribution

WHERE TO ADVERTISE

London Gazette + local newspaper + any relevant publication

EFFECT OF S27 NOTICE

Protects trustees from personal liability to unknown beneficiaries after notice period

RIGHTS OF LATE BENEFICIARIES

Cannot claim against trustees personally; may claim against recipients of property

S27 TA 1925 NOTICE

Used where trustees/PRs are unsure if all beneficiaries have been identified (unknown beneficiaries)

WHEN TO USE S27 NOTICE

Where class is conceptually certain but trustees are unsure who all beneficiaries are (e.g. “all nieces and nephews”)

S27 EFFECT

Advertise and wait 2 months → can distribute safely to known beneficiaries

S27 LIMIT

Does NOT protect against known but missing beneficiaries

S27 RESULT

Protects trustees personally but beneficiaries can claim against recipients

UNDISTRIBUTED PROPERTY

Late beneficiary can still claim any undistributed assets

RETAINED FUND

Trustees hold back part of estate to satisfy future claims by missing/unknown beneficiaries

RISK OF RETAINED FUND

Difficult to calculate shares; may lead to incorrect distribution liability

RETAINED FUND

Trustees keep part of estate to satisfy future claims

WHEN TO USE RETAINED FUND

Where beneficiaries identified but cannot all be located OR uncertainty remains

RETAINED FUND DISADVANTAGE

Ongoing admin duties and difficult to calculate correct shares

PAYMENT INTO COURT

S63 TA 1925 allows trustees to pay funds into court where beneficiaries cannot be found

EFFECT OF PAYMENT INTO COURT

Court takes control and trustees effectively discharged; last resort option

PAYMENT INTO COURT

S63 TA 1925 allows trustees to pay money into court

WHEN TO USE PAYMENT INTO COURT

Where genuine doubt as to beneficiary whereabouts and trustees want to be discharged

PAYMENT INTO COURT EFFECT

Court takes control; trustees effectively retire

PAYMENT INTO COURT LIMIT

Last resort only

MISSING BENEFICIARY INSURANCE

Trustees insure against future claims; trustees still liable but insurer pays

INDEMNITY FROM BENEFICIARIES

Recipients agree to reimburse trustees if later claims arise; risky if beneficiaries cannot pay

AFTER BREACH OF TRUST

Trustees assess liability and available protections

EXEMPTION CLAUSE CHECK

Check trust instrument for liability protection

DEFENCES

Consent, acquiescence, limitation, court directions, statutory relief

STATUTORY RELIEF

S61 TA 1925 may relieve trustee if acted honestly and reasonably

INSURANCE/INDEMNITY

Check for cover or right to recover from beneficiaries

CLAIMS AGAINST THIRD PARTIES

Trustees may sue advisers for negligent advice

CONTRIBUTION CLAIM

Trustee can seek contribution from co-trustees or third parties under Civil Liability Contribution Act 1978

MISSING BENEFICIARY INSURANCE

Insurance against future claims

WHEN TO USE INSURANCE

Where trustees want to distribute quickly but still have risk of missing/unknown beneficiaries

INSURANCE EFFECT

Trustees remain liable but insurer pays

INSURANCE BENEFIT

Cheaper than Benjamin order

INDEMNITY FROM BENEFICIARIES

Recipients agree to reimburse trustees if claims arise

WHEN TO USE INDEMNITY

Where trustees want full distribution without delay

INDEMNITY RISK

Only useful if beneficiaries can actually pay