Green Trust: A Cautionary Tale of Trustee Mismanagement

Background of the Green Trust

Task

Tim and Topsy are trustees of the Green trust set up for Zoe, Yvette and Xavier. Tim is an accountant and Topsy is an antique dealer. The beneficiaries are aged 18, 16 and 15 respectively. The trust fund was set up three years ago and was invested in shares to the value of £500,000.

Two years ago Tim suggested to Topsy that they should sell shares to the value of £400,000 and invest in a disused industrial estate, The Willows. Tim told Topsy that, according to his friend who was a property developer, the land would be needed for development in two years’ time at which point they could sell and make a profit for the trust.  Topsy was having family issues at the time and told Tim just to get on with it and purchase The Willows. Tim did not bother to get a survey of the property as he felt it would be a waste of money as the land would be redeveloped when it was sold.

The trust property included a painting worth £10,000. Last month Tim suggested the sale of the painting. Topsy disagreed but told Tim that they should probably carry on with the sale because she was too busy to spend much time on trust matters. Tim and Topsy went ahead with the sale of the painting with Tim secretly having taken a substantial financial inducement from the purchaser.

A year ago Tim and Topsy invested in Bet Now plc, an online betting company which was doing very well. They sought the permission of the beneficiaries before doing so as the terms of the trust forbade them to invest in gambling.

Zoe has just reviewed the trust portfolio and is concerned to find that the value of The Willows has dropped significantly as the land is contaminated and is not suitable for redevelopment. The shares that were sold in order to be able to purchase The Willows have done very well. Zoe is also concerned to find that the painting was sold at a very low price. The shares in Bet Now plc have not done well and are nearly worthless. Topsy has decided to retire as trustee as she feels she doesn’t have sufficient time to spend on her duties.