PCD x STEP Isle of Man Conference — The Comis Hotel, 6 May 2026

Trustee liability used to feel like a theoretical risk. Increasingly, it feels like a live one. That was the provocation put to the second panel of the day at the Comis Hotel — and the responses from four practitioners who deal with it daily confirmed that the threat environment has genuinely shifted.

The panel brought together Erin Trimble Cregeen of Appleby (IOM trust litigation), Sarah Lee of Penningtons Manches Cooper (trust and estate disputes), Ruben Sinha of JMW (family law and offshore trusts in divorce) and David Lewis of BDO (tax disputes and 20 years at HMRC). Between them, they covered the full arc of how a trust gets into trouble — and what practitioners can do to prevent it.

The IOM Framework: Familiar but Evolving

Trimble Cregeen opened by situating the Isle of Man within the broader trust law landscape. The IOM framework has long been recognisable to English practitioners — trust law here has never gone fully down the Channel Islands route of being heavily codified. But recent legislative changes have sought to further codify the Manx law, a significant example being the ability to limit a trustee's personal liability to the extent of the trust fund, provided they are contracting as trustee and counterparties are aware of that.

Cross-border work is the norm rather than the exception. "I don't think I've ever seen a case that was entirely IOM with resident beneficiaries," Trimble Cregeen said. "Maybe once in my entire career." The practical implication for trustees is that understanding how the IOM framework intersects with English courts, overseas jurisdictions and international tax authorities is not optional — it is the baseline.

What Actually Gets Trustees into Trouble

Sarah Lee mapped the terrain of trustee claims. Three broad categories dominate: challenges to investment decisions and asset stewardship; challenges to the exercise of discretion in distributions; and disputes over remuneration. Beyond these, removal applications — beneficiaries questioning whether a trustee should be in post at all — are an ever present category. "The heart of it is often not what the trustee is doing with the assets, but who they're giving them to," Lee observed. "If a beneficiary thinks a change of trustee would produce a more favourable outcome, that can be the context."

She also highlighted the court's role as more than just a forum for challenge. Rectification applications — seeking to unwind a decision or document where tax consequences were not understood at the time — are a meaningful backstop. "What I love about this jurisdiction is that the law can be your friend," she said. "The court isn't just supervising you — there's a symbiotic relationship there."

The Minutes Problem — and the AI Question

Record keeping drew the most sustained discussion of the session, and with good reason. Trimble Cregeen described two competing schools of thought on trustee minutes: keep them brief, or make them exhaustive. Neither extreme works. Minutes so detailed that every consideration is itemised create a hostage to fortune — a future claimant can argue that anything not explicitly mentioned was never considered. Minutes so sparse that the reasoning is opaque offer no protection at all.

"The balance is genuinely difficult," Trimble Cregeen said. "What it looks like will vary from situation to situation. If you're worried about a decision, take advice."

The panel then turned to AI transcription tools, which are increasingly present in professional meetings. The consensus was nuanced. Verbatim transcripts can be useful — particularly for meetings with beneficiaries, where having a precise record of what was said provides real protection (albeit they will need checking by a human present at the meeting). But over-reliance carries risk.

Lee made the critical point about ownership: who can see a trustee's notes, and in what context, depends entirely on what those notes are about. Advice on the management of trust funds is generally disclosable to beneficiaries; advice on how to respond to a potential claim by a beneficiary is not. "Think about who might be reading it and in what context," she said. "How would a person get a handle on it?" An automated transcript that captures everything indiscriminately can muddy those boundaries dangerously.

HMRC: Get on the Front Foot

David Lewis brought the perspective of someone who spent two decades inside HMRC before moving to the other side. His message was direct: if a high-profile individual is being investigated, advisers need to recognise the risk that the inquiry will expand. Personal affairs, family members, the trusts in which they are settlor or beneficiary, corporate structures — all are potentially in scope. The process is wearing, expensive and can involve formal information notices running to 50 or 60 questions.

His core advice: don't wait. "Get on the front foot. Make sure your commercial rationale for every decision is documented. If you let HMRC get the ball and start making you run around, you are in trouble."

He also offered a reminder of how sophisticated HMRC's data capabilities have become. The Connect system — a data warehouse built from a decade of Common Reporting Standard flows and other rich sources of data — gives the authority sight of the global bank interests, shareholdings and financial positions of UK residents. Residency disputes are a particular flashpoint and advisers need to beware of open source data. Lewis noted that HMRC has even now established UK residency in two cases using Strava data: the fitness tracking app that records where and when users exercise. "It's a pretty transparent world out there now," he said.

Divorce: Two Lines of Attack and the Broker's Role

Ruben Sinha outlined the two primary routes by which offshore trusts become entangled in English divorce proceedings. The first is the resources argument: where a court is satisfied that a trust will come to a divorcing beneficiary's assistance — based, among with other considerations, on its history of distributions and the letters of wishes — it can make an award on that basis. The second, more invasive route is the nuptial settlement argument: where a trust is found to have a sufficient connection to the marriage, the court can vary the trust and make orders to add or remove beneficiaries, create sub-trusts, or even order payments out to a non-beneficiary.

When proceedings begin, trustees need an early and robust strategy. Sinha's checklist: take offshore advice immediately, conduct an early exposure assessment, make considered decisions about disclosure, and think carefully about the role the trustees will play. Full submission to the English court's jurisdiction is rarely appropriate; doing nothing is also rarely right. The area that often gets missed, he argued, is the trustee's potential role as deal-broker. "Trustees are very often the ones with the purse strings," he said. "Getting them involved in negotiations can avoid years of protracted litigation."

Sinha also sounded a warning on letters of wishes. In his experience across years of trust divorce work, adequate provision for divorce scenarios is almost entirely absent. "Very often there's nothing in there — or complete silence on the issue." Old legacy structures, set up decades ago, carry the heaviest risk: their documentation rarely anticipates the litigation landscape of 2026.

Protectors, Advisers and the Toddler Rule

Lee noted that protectors and advisers are increasingly in the liability frame when things go wrong, not just trustees. Her framing was memorable: the toddler rule. "Don't introduce something because you can't take it away again. Give them chocolate once and that's it." If a protector is consistently involved in decision-making, their liability exposure can follow. But she was equally clear that appropriate adviser involvement remains the right answer — not just as protection against bad decisions, but as a form of insurance in itself. "Taking correct advice is a duty and can be a protection for your decision-making, to show good faith and help protect your indemnity from the fund. Their indemnity policy is your insurance."

Practical Armour: Section 61, Privilege and Stress Testing

The panel's closing exchanges focused on the practical tools available to trustees who want to get ahead of risk. Three stood out.

Trimble Cregeen highlighted Section 61 of the IOM Trustee Act — an underused but valuable resource. A trustee who seeks the court's guidance, opinion or direction via an application (such as a Public Trustee v Cooper application), and then acts in accordance with it, is deemed to have done their duty. "That is a real, real bonus for IOM trustees," she said. "If you're ever in doubt, seek advice — because it might protect you and the trust fund from years of hostile litigation."

Lee's closing thought was on legal advice privilege: the importance of clearly differentiating between advice about managing trust assets (disclosable to beneficiaries), advice on exercising general discretion (more likely confidential), and advice on responding to an actual or potential claim (subject to litigation privilege against the beneficiary, even if paid from the trust fund). "Don't get mixed up in your record keeping," she said. "Keep it very, very clean."

Trimble Cregeen's broader message on governance was equally practical: stress-test structures from inception. What happens when beneficiaries are on their third generation and no longer want their finances linked? What if a settlor's new spouse is not the parent of the children? "Thinking about those contingencies early, having those sometimes difficult conversations — that is where structures become more bombproof."

The overarching theme of the session was consistent across all four panellists: the trustees who get into difficulty are almost always those who failed to document, failed to get ahead of a problem, or failed to take advice early enough. The tools exist — legislative, judicial and practical — to manage the risk. The discipline is in using them.

Session 2 was moderated by David Bell. Panellists: Erin Trimble Cregeen (Appleby), Sarah Lee (Penningtons Manches Cooper), Ruben Sinha (JMW) and David Lewis (BDO).