Estate held in trust - implications of capital being lent to lifetime beneficiary?

[frazzled1]

Hi,
I've posted on this before. My uncle left his (second) wife his estate in trust - his wife is to benefit from the income from it during her lifetime. (His first wife was my aunt, they had no children). The capital then passes to my DB & me. The will also gives provision for the possibility of lending the capital to his wife or for her benefit.

My DB & I have just had a letter out of the blue from a solicitor enclosing a copy of the will and stating that they, as trustees, now intend to lend the entire capital to her for her to invest herself. They say this amount will be repayable from her estate on her death and that they do not legally need to get our consent for this but want to give us 'advance notice'. They enclose a duplicate of the letter they want signed by us and returned to show we are 'agreeable' to this. I'm not sure what exactly I'm agreeing to by signing as my consent isn't needed..... I'm also wondering:

• does this mean the money borrowed from my uncle's estate can be spent or invested however his wife chooses? (we understand she has a new financial adviser, fine if he's ok but what if he's not?...)
• does this mean the trustees aren't going to do anything further, just loan out all the capital to her & in however many years, if there's then anything left in her estate deduct the capital loan when she passes away?
• if his wife goes into a care home at the end of her life and fees are deducted from her estate to pay for this, is the loan of the capital deducted from her estate before of after care home fees are deducted?

I'm assuming that there's no guarantee that her estate will cover the amount of the loan. I hope I don't sound grabby here, I'm very grateful that we were remembered in his will and it's a relief it's finally become a tad clearer. (He passed away 18 months ago) I'm just not sure what the implications of this loan is - me & my DB would like to know for the sake of my DC and DN's.
Many TIA for any answers!

Doesn't sound very good to me - the trustees have a responsibility to all beneficiaries and that includes you and your DB.

How will they ensure that she invests wisely? How will they insure that she invests at all and doesn't just spend the money.

This isn't about being grabby, if your uncle wanted her to have the money he would gave given it to her in her will.

I'd be asking them a few more questions and/or seeking the advice of a good trust solicitor/direct access barrister.

It's impossible to advise without seeing the will and correspondence. You really need to take the paperwork to your own solicitors and ask their view.

So your uncle didn't want to give her the capital outright, but now she is going to get it anyway?! Sounds a bit extreme, - you mentioned a Clause in the original Will allowing it to be lent - aren't there any checks/exclusions included?
In your shoes, I would consult a solicitor with specialist knowledge of Trusts, (not a general one). Good luck!

Not a trust lawyer but.... my wife is.

The trustees have a responsibility to look after the trust capital.

If they are lending the money to her then it must be on commercial terms. They have a duty to you and DB to try and preserve the capital. They also have a duty to the life tenant to get some kind of income return for her. Often that means they can invest in the stock market, where you get capital growth and an income, or by buying property that is let out.

How much are we talking about? If there is £100k then to lend it out without security is possibly a breach of trust by the trustees (who may find themselves personally liable in the event that the money is not repaid). They would be remiss in their duty as well by failing to protect capital growth.

I suggest you engage the services of a solicitor, who can write to the trustees on your behalf. If you feel that they should be replaced then you can apply to court, but such proceedings can get messy and expensive.

Thanks for all your comments, very useful! The estate is worth 210k. Interesting point that the loan should be a commercial one, hadn't thought of that. It does look like I should consult a solicitor - think I'll put a couple of questions to the solicitor who sent the letter to try and clarify things a little first. Thanks again.

Whether the loan is commercial or not, it fails to meet your need to balance income generated with capital growth.

I suspect this is a covering tactic, because if you sign then it would be difficult for you to have any comeback later if there is no money in the final estate to pay back the loan.

You absolutely need to see a solicitor on this one, with copies of all relevant documents as the smallest of phrases (and occasionally even the placing of a comma) can alter meaning.

As per mumblechum take good legal advice. A few hundred with a good solicitor might protect you and your family lines interest in this estate. Be sure to take a file of all the paperwork with you as this information will be important. Good luck

frazzled - I've sent you a PM with my experience in a similar situation!