An elderly friend relies on a trust set up by her late husband for her income. As a result of late or non-payment of tax HMRC has recently charged the estate £13,000 in interest, which the trustees have paid from my friend’s income. Is it legal for trustees to make the beneficiaries pay for their mistakes?
The trust document is likely to state that, unless the trustees have acted fraudulently or unduly negligently, the trustees should not personally be liable for any errors committed in good faith. However it’s possible the trustees weren’t to blame for this. If your friend receives interest paid direct to her it’s likely that she is responsible for paying the tax on it. If the trustees are the ultimate beneficiaries there may be an argument that the interest should be paid out of the capital.