Lisa Marie Presley, daughter of singer Elvis Presley, died earlier this year at the age of 54.
Lisa Marie inherited money from her father’s estate when she turned 25. At the time, Elvis Presley Enterprises was worth around $100 million. Lisa Marie decided to set up a trust, with her mother, Priscilla Presley, and her business manager as co-trustees.
Over the years, the trust assets dwindled, and by the end of 2015 it was reported that there was just $14,000 left. The terms of the trust included instructions about what should happen if Lisa Marie died or lost capacity, and was unable to continue to act as trustee. Originally, Priscilla Presley, would have continued to act due to her role as co-trustee. However, in 2016, the trust was amended to remove Priscilla and Lisa Marie’s former business manager from their roles as co-trustees. Instead, Lisa Marie would continue as the sole trustee and her children were appointed as successor trustees, to take over in the event of her death or loss of capacity.
It has since been reported in the news that Priscilla is challenging the 2016 amendment that removed her as a trustee of Lisa Marie’s trust. Priscilla is arguing that the proper formalities were not followed; namely, that she was not served correctly with notification of her removal, and that her name was spelt incorrectly on the documents, with Lisa Marie’s signature allegedly also appearing to look different than usual.
While this case is ongoing in the United States, we have taken a look at what could happen if the same situation occurred here, under the laws of England and Wales. Is it possible to remove a trustee? Can they challenge that decision?
In the US, the type of trust that Lisa Marie set up is known as a ‘Living Trust’. Here in England and Wales, the equivalent would be what is known as a ‘Lifetime Trust’.
A settlor (person who creates a trust) can transfer assets into a trust during their lifetime. The trustees are the people who are appointed to look after the trust assets on behalf of the beneficiaries. The settlor might decide to be one of the trustees themselves.
There are a number of reasons why someone may choose to transfer assets into a trust. These include:
- Trusts are extremely flexible, and can be tailored to fit the settlor’s reasons for setting up the trust;
- Assets that are transferred into a certain trusts more than 7 years before the settlor’s death will not be included in their estate on death for inheritance tax purposes;
- Assets can be held on behalf of children or vulnerable family members; and
- Assets may be protected from claims such as those on divorce, depending on the circumstances.
It is very important to obtain detailed advice from a specialist if you are considering setting up a trust. Decisions about who should be the trustee(s) and the terms of the trust should be considered carefully. It is also important to seek advice about the tax implications of setting up and running a trust.
Can a trustee challenge a decision to remove them from their role?
A trustee could be removed from a trust by their fellow trustees, or even the beneficiaries of the trust, depending on what the trust instrument (the document setting out the terms of the trust) says. The trust instrument will usually explain the circumstances in which a trustee can be removed.
If the trust instrument does not provide the power to remove a trustee, then their co-trustees may be able to apply to court to have them removed. The law states that trustees can be removed if they are dead, remain out of the United Kingdom for more than twelve months, wish to be discharged from their role, refuse to act, are unfit to act, are incapable of acting, or are an infant.
However, if the trustee being removed disagrees with the decision, they may be able to challenge the decision through their own court application.
Usually, if a trustee dies or becomes incapacitated, the trust instrument will set out the provisions for how a replacement trustee can be appointed. It would usually be the role of the remaining trustees to appoint a replacement, or if there are none, then the power to appoint a replacement will fall on the personal representatives of the last surviving or continuing trustee.
If there was an issue with the trust instrument itself, such as negligence in the drafting that lead to uncertainty or the settlor’s wishes to be carried out incorrectly, a trustee or beneficiary may also wish to seek advice from a specialist who deals with trust disputes.
What if this situation occurred with a Will, rather than a trust?
In the case of Lisa Marie’s estate, it is unclear whether she had a separate Will or if the terms of the living trust on her death will fulfil that function alone.
If this case was based in England and Wales, we would always recommend that the settlor of a lifetime trust should also have a Will. This is important because there will likely be other assets outside of the trust that will need to be dealt with by the executors of their estate.
A person who has made a Will (a testator) can change it at any time, as long as they have the capacity and understanding required to do so. If the testator only wants to make a small change, such as replacing a trustee or executor, this can sometimes be achieved through a shorter document known as a Codicil, which can act to amend a previously executed Will. Someone who was appointed as a trustee or executor in a previous Will, which has subsequently been revoked, would not be able to challenge the testator’s decision to remove them. However in some circumstances, a named executor can be removed from their position after the testator has died. The executor may be able to defend such an application, if they disagree with it.
Our specialist team can provide tailored advice about lifetime and estate planning options, including trusts and Will structures that might be appropriate for you and your needs.
We also have a team of experts in will, trust and estate disputes who can help trustees or executors who may require advice if disagreements arise in the course of a trust or estate administration.