Trust Fund Issues (Long Post)

sk_45

Hi, 

I hope this Email finds you well. I have tried to summarise my problem as much as possible and hope you could help as I am sure this is not an isolated case.

A brief introduction, my father had a long history with BIG_HIGH_STREET_BANK since the 70s however he sadly passed away in March 1982 and a trust fund was started in 1984 where BIG_HIGH_STREET_BANK and my mother were appointed as trustees.

I was never implicitly made aware of this trust fund, even though I am the only ultimate beneficiary. 

Having recently read my father’s will it states that from the age of 21 (I am now 45 years old) I would be able to have access to the capital for the advancement or benefit of education. This is not the main issue, however I would have been able to add a view to my mother on the way that the trust fund was being run.

During Q4 2018 my mother and I went to BIG_HIGH_STREET_BANK and we enquired about The Trust (please note that my mother is now in her 80s), however Scott (the branch manager) was not able to find any direct association of The Trust to her bank accounts. 

I noticed that my mother has been receiving income payments paid directly into her account. These payments had one thing in common: they all had the number 213xxxx associated with them. 

Scott conducted some investigation and contacted me saying that The Trust was being administered by POSH_BANK, I was pleasantly surprised as I was aware of the reputation of POSH_BANK. 

I was under the impression that The Trust must have done well, and had been well managed over the 40 or so years.

I was contacted by Sarah from BIG_HIGH_STREET_BANK Trusts (administrators of The Trust Fund), by Email on 28 November 2018. 

At this point I was given the following information:

• The present value of the fund was circa £75,000, this has not really changed for some 25 years

• The value of the initial cash injection, £41,370 taken from the cash statement.

• A copy of my fathers will.

Understandably I was extremely unimpressed with the figures given to me, I imagined a ROI (return on investment) in the region of 10% per annum with 37 years of compounding.

Below is a summary of my Trust Fund, all information was constructed from documents I found at my mother’s house in late 2020.

• My father’s estate was valued at £108,453 Gross, £94,818 Net in 1984. This can be seen in the Capital Statement 1982 – 1984, produced by BIG_HIGH_STREET_BANK.

• The estate contained 2 properties PROPERTY_1 and PROPERTY_2.

• PROPERTY_2 was mortgage free and was rented out at £4,000 per annum. (I have a copy of the tenancy agreement, in 1982 BIG_HIGH_STREET_BANK were aware of this).

• PROPERTY_1 had an outstanding mortgage of £12k, but there was a £14k life insurance policy within the £108k.

• I found a letter from BIG_HIGH_STREET_BANK dated 21 July 1982 confirms the trustees would be writing to Abbey National regarding the mortgage and Royal Insurance concerning the mortgage protection policy.

• Another property PROPERTY_3 which was owned without a mortgage was sold in Jan 1982. (BIG_HIGH_STREET_BANK recently provided me with details of the date of sale, but they claim that this was done before the trustees were involved) .

• In addition to the assets above there was £36k in joint accounts passed to my mother. 

• I have found letters which appear to provide evidence that BIG_HIGH_STREET_BANK were putting pressure on my mother to sell PROPERTY_2, I really don’t understand why as it was mortgage free and earning a decent income. The only reason I can see is that BIG_HIGH_STREET_BANK had a vested interest as they make commission from buys and sells of instruments and they are also then able to charge fees.

• In 2021BIG_HIGH_STREET_BANK Customer Concerns Unit conducted an investigation and agreed that they did have a hand in selling PROPERTY_2 stating the following:

o The Estate was illiquid and monies was required to secure PROPERTY_1 as there was a small mortgage on it.

o Monies was due to support the annuity fund to provide for my grandmother. 

• Also there was a further £9.5k in cash at Woolwich Building Society. (BIG_HIGH_STREET_BANK somehow managed to convince my mother to take this cash out of Woolwich and invest it in the market, I do find this figure very convenient as it is the contra to the cost of sale of PROPERTY_2)

• My father’s will states that his personal chattels should be transferred to my mother.

• As far as I can see there was a charge of £1 to transfer this. This can be found in the inland revenue account statement 1982.

• An annuity fund should be set up to provide an income for my grandmother:

o £150 for the first 5 years.

o £200 for the following 5 years.

o £250 for the remainder of her life.

• Any surplus not required to service the annuity should pay an income to my mother for her lifetime and then pass on to me.

• The will appears to give me claim to the capital when I attained the age of 21. 

• The will appears to give the trustees the ability to invest in whatever they see. 

Now for some of the issues. 

• The trust fund is only worth circa £80k today, this is after 40 years and its initial cash injection was £41k.

• Mother has had an income of less than £50k for the years 1998 – 2018. (PROPERTY_2 would have generated in the region of £600k gross in income, this includes interest).

• The trustees sold PROPERTY_2 for £43k in 1984, the cost of sale was £9.5k! This information is contained in the Capital Statement 1982 – 1984 produced by BIG_HIGH_STREET_BANK.

• The £32k from the sale of the house was invested in Bonds and dividend shares. There is little or no growth in the value of Bonds! The value of PROPERTY_2 is around £500k today

• In 1984 forecast income generated by the trust fund was £462.46. In the previous year income generated by PROPERTY_2 was £3,075 source (Capital Statement 1982 – 1984). 

• BIG_HIGH_STREET_BANK suggested that £9.5k not yet invested in the stock market should be placed in Woolwich. This is earning 8.75% interest.

• BIG_HIGH_STREET_BANK are including the £9.5k with the Woolwich within the Trust Fund. 

• I have found a letter from BIG_HIGH_STREET_BANK suggesting that £9.5k should be invested in the financial markets. It would appear that the entire £9.5k was taken. I have written evidence on BIG_HIGH_STREET_BANK headed paper that monies should be invested in instruments which would yield circa 3% net, remember this was earning 8.75% previously. 

• One of the investments, British Shipping, went into liquidation, so they lost our money!

• I have the capital statement produced by BIG_HIGH_STREET_BANK which thankfully lists the investments that the £41k was invested in. The next valuation I could find was for 1990. Again this lists the investments, and I can see very little difference for the 6 years, what on earth were they charging fees for?

• I have found a letter from BIG_HIGH_STREET_BANK dated 22 May 1991 stating the following:

"The fund has produced no income, and our fees are £613.26 + 91.98 VAT"

• I have a terrible feeling that for years 1984 – 1997 little or no money was paid as income to mother and mother was having to pay fees. Please bear in mind how much PROPERTY_2 would have generated in income and also the fact that the house would have increased in value.

I have found several letters from BIG_HIGH_STREET_BANK (2003) to highlight that my mother has tried to get in contact and she has been dissatisfied by the performance of The Trust. Their response was usually smoke and mirrors.

I have also been in touch with BIG_HIGH_STREET_BANK Customer Concerns Unit twice, and they see nothing wrong in the way they have operated. In fact they are blaming my mother, they say all investments required my mother’s authorisation, she is a lay person and simply agreed to what BIG_HIGH_STREET_BANK said.

I had conducted forensic analysis, and passed all my findings to the Financial Ombudsman however they were of little use.

I have spoken to a few solicitors and all they want is money upfront, which sadly I am not in a position to give as I've been out of work for 2.5 years. 

Help!!

Cheers

SK

sk_45

Actually please tell me if this isn't the correct forum and if I need to move my post in order to get some replies. 

Cheers

SK

Keep_pedalling

I do don’t think any of can help based on what you have told us. Banks are the last people you should use to manage trusts or administer estates as their charges are very high. You really need professional advice.

SeniorSam

It would seem that the Trust has not been well managed, but without far more detail of all the transactions and investments made, which I doubt you will ever find out, as only the Trustees are supposed to have this information and doubt that your mother would have had sight of these unless she requested them.

As stated by Keep-pedalling, banks are the last people who should be trusted to manage Trusts, but far more importantly, were you notified of this inheritance at age 21, as the Trustees should have made you aware of your legal entitlement. This should have been documented by the Trustees.

Even then, only the Trustees are entitled to know what investments have been made, but had you received notice, you could have at least asked your mother for the details of the investments and although she would not be legally obliged to let you know this, it is possible that she would. That then would depend on your knowledge and understanding of investments at the time.

Many Bank Trustees have unfortunately gained a reputation of poor management and certainly not being at all  as helpful as they could where other Trustees of the families have been involved. Unfortunately, I doubt that you will ever get to the bottom of this, but at least the have grown in value.

The Trust passes to you on the death of your mother and until then, there is little that you can do unless your mother is incapable of managing her affairs, in which case I do hope she has given you authority to take over the  management of her affairs, which would include the Trust.

doodling

Hi,

Given that your mother was a joint trustee, do you really want to pursue a course of action that would see her partially responsible for any losses you might have suffered?

securityguy

Yet another demonstration of why complex trusts are complex.

It would be interesting for someone in the business studies / psychology world to do a PhD comparing the rates at which young adults granted access to money through inheritance squander it, versus the rate at which complex trusts lose money anyway.  My bet is that the latter is actually a bigger problem than the former, but all we really have are anecdotes.

"Having recently read my father’s will it states that from the age of 21 (I am now 45 years old) I would be able to have access to the capital for the advancement or benefit of education. This is not the main issue, however I would have been able to add a view to my mother on the way that the trust fund was being run."

You wouldn't have.  You would have been a _beneficiary_ of the trust, but that would not have given you any rights to see what was going on inside it.    If she'd wanted to talk to you about it, there was nothing stopping her at any point: trustees are not (in general) bound to hold the affairs of the trust as deep dark secrets.   All it would have allowed you to do is ask "can I have some money for university?" and the trust to say "yep, here you are" (something it could probably do whatever age you were: in those days, discretionary trusts were very discretionary and the age limit was probably only a side letter which the trustees could override).

This sounds like an absolute shambles, but you are focusing you anger in the wrong place.  Your mother was a joint trustee and appears to have done nothing; she could at any point have intervened.  The ludicrous annuity clause complicates it (and was, I suspect, a 1980s-style IHT hack, but it's all lost in the mists of time) because the trusr couldn't just be wound up; even if you are the remainderman, so long as your mother is alive the trust cannot be wound up.

The bank sounds like it has not acquitted itself well, but the other trustee let them do this, and your father set the whole mess up in the first place.  Yes, it needs sorting out, but seeing this as malfeasance by the bank isn't going to get you anywhere: given what was established, the rest of the saga seems pretty much inevitable.  The bank had limited obligations to actively manage the funds, limited powers to take risk and their main task was to preserve the capital and pay out the annuities.  If that meant leaving it in deposit accounts, so be it.  Particularly with the other trustee absent and not involved, what else should they have done?

You need to talk to the bank and your mother and see what you can do about winding the whole thing up.  But I don't really see that anyone, other than your mother, has done anything wrong, and therefore if you want to force the issue your main option is taking a personal legal action against your mother for failing to act in the trust's interests, which I suspect is a place to which you don't want to go.

securityguy

"as only the Trustees are supposed to have this information and doubt that your mother would have had sight of these unless she requested them."

The OP's mother was a trustee, so was perfectly entitled -- indeed, one could argue, obliged -- to have sight of them.

Malthusian

Nothing in your post indicates the Financial Ombudsman was incorrect in their conclusion. You would need overwhelming evidence to convince a judge to overrule the FOS.

My inclination would be to forget about the money until your mother's death, then claim whatever is left and treat it as a nice bonus. Until then I cannot see any good reason for you to get involved, bearing in mind your mother is the trustee (plus the bank) and you don't have any power over the trust in your own right.

sk_45

Hi,

Thanks for replies…

A little more background, the investments were very lazy, half was invested in fixed income, and they other half was invested in dividend shares (at here were 8 of them)! So the bank effectively did sod all.

My main frustration is that they effectively forced my mother to sell the house in order for them to get there dirty mits on the cash. 

My father was not a fool he had been a chartered accountant! My background is 20 years in banking!

I can see that my mother had spoken to the bank in 1990 asking for them to provide annual reports and also to provide evidence of fees and commissions.

Also I have letters from early 2000 from the bank stating that my mother was less than impressed with the income produced.

My mother is a layperson therefore would not really have understood the investments, however she knows how to run a house as she looked after PROPERTY_2 for years whilst my farther worked. I feel that the bank took unfair advantage of my mothers innocence.

The biggest concern is that they sold the house which was generating a good income and we all know that since the beginning of time property increases in value. 

I think that the bank has committed breach of trust, negligence and miss selling. 

Cheers

SK

Keep_pedalling

Just how did they force her to sell the house? 

sk_45

I can only assume that they forced her to sell the house, I have found a letter dated 1983 whish has talk about my mother deciding NOT to sell the house. 

Also after recent investigation by the bank, they admitted they had a hand in selling the house due to lack of cash in the Estate,