Retiring Trustee – Reasonable Security And Retention Of Assets

Under section 43(b) of the Trusts (Guernsey) Law, 2007, when a trustee resigns or is removed it may require that it be provided with reasonable security for liabilities before surrendering trust property.

What is considered 'reasonable security' will depend on a number of factors including: the background of the trust, the identity of the person giving the security, the type of security, whether there is any potential or known liabilities, the assets held by the trustee.

Usually, security is taken in the form of a contractual indemnity as it is a practical way for an outgoing trustee to obtain security without imposing undue limitations on the incoming trustee and trust fund generally. However, there may be limited circumstances where the retention of assets is also appropriate.