Trust Fund Issues (Long Post)

doodling

Hi,

I'm playing devil's advocate a little here (but not much).

sk_45 said:

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. 

What did your mother do at the time of the house sale to protect the interests of the trust?  Did she support the bank's decision by selling the house (presumably it required her assent)?  What legal / financial advice did she procure at the time to ensure she fulfilled her duties as trustee?

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.

Your mother is a trustee and is therefore responsible for the assets of the trust.  If she felt overwhelmed or that the bank was not acting correctly then she should have sought independent advice or resigned her position as trustee.  There may be a case to be made that both she and the bank have been negligent in their actions as trustees.

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. 

As above, it is not just the bank in the firing line, do you really want to end up in court accusing your mother of such things?

The problem you have is that any action you take against the bank is likely to equally valid against your mother.  Whilst you might be able to argue that the bank did some less than optimal things, it is a fact that your mother stood by and let them do those things.  I don't think that naivety would be much of a defence for her.

The fact that the FOS is not interested suggests that any legal path to address the past is likely to be arduous, I also think that you are at risk of causing your mother more stress than she needs at her age.

I would focus on how you can move on from the current position rather than pursuing the bank for their past sins.

Malthusian

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.

No, they did what they were supposed to. Investment funds weren't as widely used in the 80s as they are now and there is no evidence in your post that your mother and the bank failed to exercise their duty to invest the money as a prudent businessperson would (in the 80s).

Nowadays the trustees would have done less than the bank did, as they would probably invest the money in an externally managed multi-asset fund rather than a directly held portfolio of individual stocks and shares.

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.

Would that be Property_1? In your first post there was a life insurance policy in excess of the £12k mortgage plus cash funds which could have been used to pay it off. So it's difficult to see how they could have forced her to sell the house.

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

If you've been in banking for virtually your whole career you should be familiar with the regulated complaints process and aware that 1) poor investment performance is not grounds for a complaint 2) if an Ombudsman has rejected your complaint you will require an extraordinary amount of evidence to persuade a judge to overrule them.

Property_2 may or may not have delivered a higher return than what it was reinvested in, but even with the benefit of hindsight it may not have been the wrong decision. Your mother and the bank had to balance the needs of multiple beneficiaries and take into account their duty to diversify the trusts' investments.

Malthusian

sk_45 said:

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,

In your first post there was £60k of liquid funds between cash accounts and the life insurance policy. The mortgage was £12k. If any of those funds were invested in stocks or shares they could easily have been encashed. If all of this £60k disappeared meaning the other property had to be liquidated, the only possible explanation based on the information we have is that your mother spent it. (Apart from fees, but that would only account for a small proportion of that £60k, exorbitant as they probably were.)

I honestly cannot see any point in hassling a woman in her 80s over what she did with the money 40 years ago, which is why my inclination would be to forget about it until her death (there is nothing else you can do in your own right) and treat anything left to you from the trust as a bonus.

sk_45

Malthusian thanks for replying. 

The position in 1982 - 1984 is as follows:

PORP_1 value £43k outstanding mortgage £12k
PORP_2 value £43k NO MORTGAGE. Earning £4k a year 1982
Life insurance £14k - This pays off the mortgage on PROP_1

Cash in bank £35k 
Cash in Building Society £9.5k

A healthy estate!

I have no issue with my mother, she's done nothing wrong. 

The bank (professional trustees) had no right to advise sale of PROP_2, this is my issue, I hope this makes sense.

Cheers

SK

theoretica

A lot of your arguments seem to be based on hindsight - what has happened to markets/property/investment.  That isn't taken into account when deciding if an action was negligent at the time it was made. 

sk_45

theoretica said:

A lot of your arguments seem to be based on hindsight - what has happened to markets/property/investment.  That isn't taken into account when deciding if an action was negligent at the time it was made. 

Isn't PPI and example of hindsight?

Malthusian

Life insurance £14k - This pays off the mortgage on PROP_1

You're now telling us that she wasn't forced to sell either property and she and the bank made that decision with a free hand.

I have no issue with my mother, she's done nothing wrong.

If your mother has done nothing wrong then neither has the bank in the context of investment decisions. They were joint trustees.

The bank (professional trustees) had no right to advise sale of PROP_2, this is my issue, I hope this makes sense.

Yes they did. They had a legal duty to consider diversification of the trust's assets and balance the needs of multiple beneficiaries. There is no evidence in your posts that the Ombudsman was incorrect not to uphold your complaint about the way your mother and the bank carried out those duties.

Isn't PPI and example of hindsight?

Some victims of PPI had their signatures forged. Others were sold policies that they would never be able to claim on - based on information the banks knew at the time of application. That's the complete opposite of hindsight.

I am struggling to understand how someone who worked in banking for 20 years cannot understand that poor investment performance, which you admit you are judging with the benefit of hindsight, is not in itself valid grounds for complaint.

sk_45

The FOS did not reject m6y claim, they said they did not have the capacity to deal with the issue. Also there was no firm regulation in place and a court of law would be the best place to go..

Daniel54

Malthusian has made many valid point.Picking on one, your mother was a joint trustee and could not be forced to do anything.

You might also want to reflect that in 1980s timeline you refer to (82-84) ,the UK housing market was moribund ,interest rates in double digits and unemployment high  - all following a deep recession.

Playing devil's advocate, it is not inconceivable that the availability of tenants was  not guaranteed and that periods of vacancy would be  considered a drag on the cash assets of the  estate.

So selling the property might have seemed sensible at the time, without the benefit of 40 year's subsequent knowledge.

It looks like your only recourse is to take and pay for legal advice, if that is a route you choose to pursue.

Malthusian

That does not surprise me as the FOS probably applied a time bar (although they have been known to ignore those).

However the courts are no more receptive to claims of investment mismanagement based entirely on hindsight than the FOS, so I still don't see any reason to waste your money on a court case.

Your assumption that Property 2 would have generated £600,000 worth of rent over 38 years starting from £3,075pa in 1983 would require the rent to increase by 7.5% year-on-year. That is not a realistic assumption to say the least. It is believable that capital growth in a house could be 7.5%pa over 38 years but no tenant is going to tolerate rental increases of 7.5% year in year out, and tossing them out to get a new tenant who will means void periods and added maintenance / renovation costs. Going to court and claiming that your mother and the bank mismanaged the trust's assets based on figures like that would be a waste of your money.

Ditto claims that the trust must have been mismanaged because the trustees weren't churning the shares or that your mother didn't receive an income for 13 years, which appears to be based on no evidence.