In a recent judgment, a trustee requested the Guernsey Court’s blessing to distribute the assets of the trust in accordance with a letter of wishes in order to limit any future challenge of the trustee’s decision.
The Court considered the following factors as important when considering whether to approve the decision of the trustee:
- The trustee had sought legal advice;
- The trustee was aware of the requirement for it to exercise its own discretion;
- The trustee did not rush into making its decision;
- The trustee met with the beneficiaries who were receiving the shares that may be considered unfair and gave them the opportunity to raise any concerns.
The Court emphasised the importance of a trustee making reasoned decisions and recording those decisions. The Court referred to the question asked in the case of In the matter of the Mischa Trust (Guernsey Royal Court, 15/2010), namely “Is the decision… one which a reasonable trustee properly instructed could have arrived at?”
The weight to be attached to a letter of wishes will differ depending on the facts and circumstances of the particular trust in question.
On the basis of the factors set out above, the Court blessed the trustee’s decision to distribute the trust fund in accordance with the letter of wishes.
This judgment is a reminder of the importance of trustees acting independently, taking relevant professional advice and carefully considering all relevant factors when exercising their powers. If the trustee has undertaken an autonomous process which involved the factors set out above, a Court is more likely to support the trustee in the exercise of its discretionary powers.
DQ has a large specialist trust and private client team consisting of three directors, a senior associate, two associates and a trainee. Our specialist team has extensive experience of advising clients in relation to the establishment and structuring of trusts and foundations, estate planning, trust and estate litigation, international tax investigations and TIEA requests. For further information, please contact director and head of department Annemarie Hughes