A member asked almost 9 years ago

Parents spent trust fund money before 18. 100k+(?)

When my fiance was a baby there were 2 accidents where she was hurt, this resulted in 2 payouts that went to a trust fund which her parents had access to. By the time she turned 18, the fund was empty. Is there anything she can do?

Jared Pereira
Principal Solicitor at Pivot Business Lawyers


Whether your friend can take any action depends on a number of factor, broadly including:

1. Who is/was the Trustee of the trust;

2. What the terms of the trust were; and

3. What the funds were used for.

It is unclear if this is a formal trust or whether her parents simply put the money aside for her without a formal understanding that the money was held on behalf of your friend. For the purpose of discussion I shall assume there was a formal trust set up with your friend as a beneficiary.

When you say her parents had "access" to the trust it is not clear if you mean they were the Trustees or if they had influence over the trustee. Either way, a Trustee of a trust has to act in the best interests of the beneficiary of the trust (which I am assuming is your friend).

However, the terms of the trust are important. it could well be that the Trustee has a broad discretion to disburse the funds in whatever way they deemed fit. For example, to pay for your friend's medical bills, special education needs, or to invest on her behalf. Depending on the terms of the trust, there may not, in that sense, be a "guaranteed principal" to give to your friend when she reaches a certain age. The funds could have been genuinely lost or disbursed.

Much also turns on the manner in which the trust funds were allegedly used. Trustees can be liable for breach of trust if they have used the funds or administered the trust in the interest of others (including themselves) above the interests of the beneficiary. So for example, if the trustees used the money for their own holidays or to buy jewellery for themselves, they can be held to account by your friend.

Even if breach of trust can be proved, your friend should consider the relationship with her parents if she wishes to take further action.

Suggested way forward

Obtain a copy of the trust deed, speak to a lawyer to review the trust and if there has been a breach consider if your friend wishes to take action. If there is no trust deed, consider if there has nevertheless been a constructive or implied trust depending on how the funds were held by the parents.

Answered almost 9 years ago   Legal disclaimer

Val Antoff
1 lawyer agrees with this answer and 1 member found this useful

Hire lawyers to solve your legal problem now. Learn more

Other Questions

If you're experiencing any technical problems, please email techsupport@lawadvisor.com.