Trust and Probate Litigation partner Emma Holland responded to a query in the Financial Times Your Questions section, in print and the online edition.

Emma explains that while the terms of a trust are not normally affected by a marriage ending, changing family dynamics can mean that the individuals involved may want to take action in the best interests of the beneficiaries.

I’ve been married twice and have two teenage children from my first marriage. One of the trustees of my children’s trust is my most recent ex’s brother. As we’re now in the process of divorcing, what does this mean for him as a trustee?  

Emma says that depending on the trusts’ terms it is unlikely that your brother in law’s trustee status was conditional upon your marriage and he would therefore remain in situ.

As the family dynamics will inevitably change in view of your impending divorce, you or your brother-in-law may feel uncomfortable with him remaining as a trustee. If this is the case, it is likely that the trust deed will provide a mechanism for his retirement (stepping down).

A trustee’s retirement will often involve certain formalities (again depending on the trust’s terms) such as notification of the other trustees and appointment of a replacement, whose identity may be set out within the trust. A deed will usually then appoint a new trustee, address the outgoing trustee’s retirement, and set out the basis on which the incoming trustee will indemnify (ie protect from liability) the outgoing trustee in respect of any liabilities that have arisen. The terms of indemnities often require negotiation.

If your brother-in-law refuses to retire, you could ask whoever has the power to remove or replace him to consider doing so. A protector will often hold this role. Unless it is clear from the terms of the trust that removal is a personal power, it is likely that they will only be permitted to do so if it is in the best interests of the beneficiaries.

What if there is no person nominated to remove and appoint new trustees? If your children are both aged over 18 and have capacity, and are the only beneficiaries, then they can direct your brother-in-law to retire and either appoint someone to replace him or the continuing trustees can consent to his retirement. There must be a trust corporation or at least two trustees remaining after his retirement.

If these options are not available, and you are concerned that your brother-in-law is no longer acting in the best interests of your children, a court application made by your children or, if they are minors, yourself, on their behalf, may be necessary. The court has an inherent jurisdiction to supervise and intervene in the administration of trusts should it see fit and this extends to the removal of trustees.

Hostility and friction in the relationship between your children and brother-in-law will not alone justify the court removing him as a trustee. Similarly, not every mistake on his part will suffice. If however you are able to demonstrate that the trust assets are in jeopardy and/or the trust is no longer being properly administered in the interests of the beneficiaries, the court will be likely to assist.