Executor and Trustee jailed for fraud and forgery
Matthew Evans and Sarah Cash
Every person should make a will at
least once in their lifetime. When doing so or when setting up
a trust it perhaps goes without saying that they must choose their
executors and trustees very carefully indeed.
A recent case in the criminal
courts has demonstrated once again why that is so as a woman has
received a three year jail sentence from Bolton Crown Court
following a conviction for fraud and forgery in relation to the
estate of her late brother.
The facts of the case were that the
deceased died in 1994 and his occupational pension fund was placed
into a trust for his then infant son. The executors of his
estate and the trustees of that fund were the mother of his son and
his sister, to whom he also left the majority of the remainder of
his money.
The trust funds were placed in
holding accounts in the name of the infant beneficiary which
required the signature of both trustees for withdrawals.
The court heard, however, that in
1998 the accused began to make fraudulent withdrawals by forging
her co-trustee’s signature. The fraudulently withdrawn funds
were then either sent to her home by way of cheque or transferred
to other accounts.
These fraudulent withdrawals went
unnoticed until August 2008 when the beneficiary (who by that stage
was 20) wished to consider purchasing a house and asked his mother
to check the balance of the trust fund. At this point it was
discovered that the fund had shrunk to less than £300. The
police were contacted and the withdrawals were traced back to the
co-trustee.
As a result the co-trustee has not
only received a custodial sentence but her assets have been frozen
and she may be ordered to repay the money.
The case is noteworthy as firstly
it demonstrates that the courts are willing to throw the full force
of criminal law against trustees who fraudulently seek to abuse
their office.
Moreover, from a civil perspective,
it once again demonstrates the absolutely crucial need for lay
trustees and executors to keep a close eye on the funds that they
have been entrusted to manage and, also, an equal close eye on
their co-trustees and executors.
Although there has been no
suggestion of it in this case, it could be argued that if the
beneficiary could not recover his lost funds from the fraudulent
trustee then he could pursue his mother, as co-trustee, for breach
of trust for not properly managing the funds.
Whilst it is abundantly obvious
that a trustee who acts fraudulently will be ultimately held
accountable for their acts, lay trustees must also be aware that
mere acquiescence in managing trust funds is arguably not
enough. To protect their position, they must vigilantly and
pro-actively manage the funds and if they feel unable to dedicate
sufficient time to doing so then they would be well advised to
relinquish their role, perhaps to a professional trustee such as a
solicitor.
As mentioned above, however,
perhaps the most crucial lesson that can be learnt is that
executors and trustees must be chosen with utmost caution. If
a testator is undecided or does not wish to unduly burden their
loved ones with the responsibility then there are professionals who
will accept the responsibility of the role, thus minimising the
risk of problems after their days.
For further information on potential breach of Trust
action please contact Matthew Evans, Senior
Associate at Hugh James on 029 2066 0562 or e-mail
matthew.evans@hughjames.com
For further information on Trusts and Wills please
contact Sarah Cash, Senior
Associate at Hugh James on 029 2066 0563 or sarah.cash@hughjames.com