Common mistakes with an existing trustee, and how to avoid them

Mistakes with an existing trustee rarely look like mistakes when they happen. A set of accounts goes unread, a request is made over lunch, a family changes and the paperwork does not. Years later the cost appears, usually at a bad moment: a dispute, a death, a sale or a bank question.

This page covers the errors that sit on the settlor's or the family's side of the relationship. Each section gives the mistake, why it costs and how to avoid it. If you are still choosing, start with how to choose a trustee in Switzerland.

Mistake one: never reading the accounts

Under the Hague Convention, a trustee holds the assets as a separate fund in their own name and must manage them and account for them. The duty to account only works if someone reads what is delivered.

Why it costs. Accounts that nobody questions let small drifts become habits: unexplained transfers, loans to related parties, charges that grew without discussion. When the family finally asks, the trustee can say the accounts were sent every year and nobody objected.

How to avoid it. Read each set of accounts with a short list of questions: what changed, why, and who approved it. Ask for the minutes behind every large movement. Know what information your trustee must give you so that you ask for the right documents rather than a vague summary.

Mistake two: giving informal instructions

A settlor who is used to running a business often treats the trustee as an adviser. A call, a message or a word at a meeting becomes "what was agreed".

Why it costs. A trustee has to act under the trust deed and in the interests of the beneficiaries. An instruction that is not written down, or that conflicts with the deed, puts the trustee in a bind. They either decline, which feels like obstruction, or comply, which may be a breach. Reserved powers are allowed by the Convention, but they have to be real, documented powers, not habits. See settlor reserved powers and the trustee.

How to avoid it. Put every request in writing and ask the trustee to confirm which clause of the deed it falls under. Use the letter of wishes for guidance, and the deed for binding decisions.

Mistake three: leaving the letter of wishes out of date

A letter of wishes tells the trustee how you would like discretion exercised. It is guidance, not a command, and it ages quickly.

Why it costs. Marriages, divorces, births, illnesses and business sales all change what a sensible distribution looks like. A trustee who holds a letter from many years ago has two poor options: follow wishes that no longer fit, or set them aside and risk a complaint that they ignored you.

How to avoid it. Date every version, review the letter after each family event, and ask the trustee to record that the new version has been received. Where relatives have different needs, read trustee care for vulnerable and blended-family beneficiaries.

Mistake four: no review of the trust or the trustee

Many trusts run for years with no one outside the relationship looking at them. The trustee, the bank and the family each assume another party is watching.

Why it costs. Deeds drift from practice, powers lapse, the people named as successors die or move, and the structure no longer matches where family members live. Problems found in a calm review are cheap to fix. The same problems found during a dispute are not.

How to avoid it. Set a regular rhythm: a yearly check of the basics and a fuller independent review of the trust and its trustee at longer intervals or after a major event. The annual trust health check is a practical starting point.

Mistake five: assuming the protector or the bank will notice

A protector, an adviser or a bank can create a feeling of oversight. In practice each looks at a narrow part of the picture.

Why it costs. A protector may only hold a veto over certain steps. A bank checks its own compliance, not whether distributions fit the deed. Where a trust holds land registered in the trustee's name, the link to the trust may be noted in the register under Article 149d of the Swiss Private International Law Act; a link that is not noted cannot be relied on against third parties acting in good faith. That is a gap nobody else will close for you.

How to avoid it. Write down who is responsible for what. The trustee, protector and beneficiary triangle sets out the usual split of roles.

How one mistake unfolds: an example

The following is an illustration, not a real case. A family established in Lausanne set up a trust with a corporate trustee and met the trustee at the start. After that, the accounts were filed unread, a daughter's request for a distribution was agreed by telephone, and the letter of wishes was never revised after the family business was sold.

Each step was minor on its own. Together they left the trustee defending a decision with a thin record and the family without evidence of what they had actually asked for. A reading of the accounts or a short review at the third step would have changed the outcome. For the aftermath, see a dispute between beneficiaries and the trustee.

A short checklist for an existing trustee

• Read the latest accounts and list three questions for the trustee
• Ask for the minutes behind every large movement
• Confirm that all instructions you gave are in writing
• Date and update the letter of wishes after each family event
• Check that successor trustee and protector appointments are still valid
• Record who is responsible for oversight, in writing
• Book an independent review if none has taken place recently