Trustees: beware the personal risks you are taking
- AuthorClaire Read
Being an executor and trustee of a will or a trust is a very personal appointment. However, a recent case highlighted the importance of knowing what you are letting yourself in for and the personal risks that you are taking.
That may sound dramatic, as often family members are appointed as executors or trustees, but some may not be aware of the personal liability that will follow if you do or get something wrong.
In this recent case, a man set up a trust with significant assets and some years later his daughter was appointed as a trustee with him. The trustees made decisions that would ultimately end up with HMRC concluding that they had created a very large Capital Gains Tax liability.
Although there were three trustees, the daughter was the only one with significant assets in her own name. Consequently, she would personally be made to pay for the liability.
In an attempt to avoid paying the tax liability personally, she argued that her appointment as a trustee should be cancelled (nullified) on the grounds of her father’s undue influence and she did not really understand what she was getting into. The court accepted that she had placed trust and confidence in her father in relation to the management of the trust, but she had signed four deeds of appointment indicating her acceptance of being appointed as a trustee at the time. As such, her claim failed.
We see this sort of arrangement all the time with family members. One such member taking the lead and making decisions with the others just agreeing.
If you are a trustee, whether that be of a small legacy left to a minor beneficiary (a child under the age of 18) in a will, or a larger trust containing many different assets, it is important to remember that you are personally liable and responsible if something goes wrong. There are ways to reduce the risk of personal liability and if you have any questions about the role of an executor or trustees get in contact with us.
I am working from home, but available to talk if you need any further advice on your role as a trustee.
If you have a question, I would much rather you ask it and we spend some time having a free chat, than not. I can be contacted on 01245 453835 or firstname.lastname@example.org.