Trustee Troubleshooting: Dealing With Trust Deeds That Are No Longer Fit For Purpose

• Published date: 05 July 2023
• Subject Matter: Corporate/Commercial Law, Wealth Management, Corporate and Company Law, Wealth & Asset Management, Securities, Trusts
• Law Firm: Carey Olsen
• Author: Ms Bernadette Carey and Sarah-Jane Hall

A Cayman Islands perspective

Members of the trust and private wealth team in the Cayman Islands discuss dealing with trust deeds that are no longer fit for purpose, including problems and solutions for trustees within the Cayman Islands.

It is often acknowledged that, like fine wine, some things get better with age. However, the same is not always true of trust deeds - particularly those that may have been drafted using a mechanical typewriter or require service of notices by Telex. While families grow and evolve, legislation is regularly revised and expanded upon and technology continues to develop at an incredibly fast pace, trusts often remain unchanged. As a result, the basic documentation on which hugely valuable structures rest can quickly seem archaic. It is true that mechanisms to vary, reform, and resettle trust deeds may sometimes be found within trust deeds themselves, or otherwise in statute but, commonly, implementing changes to older structures can be a cumbersome task.

Problematic deeds

An unfortunate number of deeds governing older trusts which now require modernisation can, on closer inspection, contain some very serious drafting deficiencies. While some of the challenges can be overcome with careful thinking and a considered approach, the seriousness of the omission of key provisions in trust deeds is often overlooked until it is too late. Some of the issues that both advisors and trustees should take care to look out for are summarised below.

Problem with the trust deed	Effect
Missing trustee charging provision	In the absence of this provision, the trustee cannot automatically have its fees paid from the trust fund.
No trustee exoneration provision	Without a trustee exoneration provision the trustee will be at greater risk of personal liability than is market standard and could be held liable for all losses to the trust fund; not just those losses which have arisen due to the trustee's gross negligence or fraud.
Missing "anti-Bartlett" provisions	An anti-Bartlett provision excludes the duty of a trustee to supervise or intervene in the business of underlying companies in which the trustee holds shares. Without such a clause the trustee's duties are much more onerous (and its potential liability much more extensive).
Missing amendment provisions	Without these provisions the trustee cannot easily amend the trust and may require the assistance of the courts.
Missing governing law clause	Commonly overlooked, the absence of a

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