Author: Simon Taube QC (2000)

Simon Taube – 10 Old Square
(taken from Isssue No 10 –  January 2000)

Background to the trustee’s lien

In the course of acting as trustee a person may incur liabilities and expenses. As a general rule the trustee is entitled to be indemnified against such liabilities and expenses out of the capital and income of the trust fund. However, the trustee’s right to an indemnity extends only to liabilities and expenses properly incurred.

The trustee’s right of indemnity gives him a first charge on the capital and income of the trust fund. It has priority over the rights of the beneficiaries to receive distributions. The trustee’s right arises by operation of law. Accordingly, even if under the terms of the trust instrument the beneficial trusts have ended and one or more persons are absolutely entitled in possession to the capital (i.e. the trusts are `at home`), the trustee is entitled to retain possession of the capital until his outstanding liabilities as trustee have been discharged or secured.