Liability cover for trustees, foundation boards and family offices in Portugal

A private client in Portugal who agrees to act as a trustee, sit on the council of a family foundation, or take a role in a family office has usually done so as a matter of trust and family duty, and rarely with a clear picture of what they have personally taken on. The decisions that role involves — how assets are invested, when distributions are made, how a conflict between beneficiaries is handled — are taken on behalf of others, and the person taking them owes a fiduciary duty for which they can be pursued in their own name. When that happens, it is their own assets, not the structure's, that a claim reaches. This article sets out how fiduciary liability differs from ordinary D&O, the claims that trigger it, the cross-border layer that Portuguese-linked structures add, and the concepts — Side A protection, run-off cover — a reader in this position should understand.

Not the same as corporate D&O

Ordinary directors and officers (D&O) insurance answers the management liability of company directors for running a company. Fiduciary and family-office liability cover answers a different duty. A trustee, a foundation administrator and a family-office principal are not managing a trading company; they are holding and deploying assets for the benefit of others, under duties of loyalty, care and impartiality that the law imposes on that role specifically. A claim in this world alleges breach of those fiduciary duties — an imprudent investment, a distribution made or withheld wrongly, a conflict handled to a beneficiary's detriment — rather than mismanagement of a company. A standard corporate D&O policy is frequently not written to respond to that kind of claim, and assuming it will is a common and costly error.

What triggers a claim

The claims that reach trustees, foundation boards and family-office principals cluster around a recognisable set of decisions:

• Investment decisions — the selection, retention or concentration of investments, and allegations that a portfolio was managed imprudently or outside the mandate
• Distributions — payments made, withheld, delayed or made to the wrong party, and disputes over the exercise of discretion
• Conflicts of interest — a decision in which the fiduciary's own interest, or that of one beneficiary, is said to have been preferred
• Administration errors — missed deadlines, defective record-keeping, tax or reporting failures, and mistakes in the mechanics of running the structure
• Disputes between beneficiaries — family disagreements in which the fiduciary is drawn in as the decision-maker whose conduct is challenged

These claims often surface years after the decision, and frequently from within the family itself. The person defending is the individual who held the role, and the cost of defence alone — before any question of a settlement or award — is capable of reaching personal wealth directly.

The cross-border layer

Structures connected to Portugal rarely sit in one jurisdiction. A foundation may be established under the law of one country, hold assets in another, and have beneficiaries or administrators resident in a third, with a family office in Portugal coordinating the whole. That spread matters to a claim in two ways. First, the governing law of the structure and the forum in which a dispute is heard shape what duties apply and how a claim is decided, and they are not always the jurisdiction where the fiduciary happens to live. Second, cover has to be capable of responding across those jurisdictions rather than being tied to one, because a claim can be brought where the assets, the beneficiaries or the structure are, not merely where the individual is resident.

The exposure follows the role across borders, but an off-the-shelf policy written for one jurisdiction may not. Matching the cover to where a claim could actually be brought is the point of the exercise.

Which law governs a given structure, and which forum would hear a dispute, are legal questions for the client's own lawyers and trust advisers. The insurance task is to ensure that, once those questions are answered, the cover is arranged so that it responds wherever the claim lands.

Concepts a reader should understand

Side A protection

Side A is the layer that protects the individual directly, for loss that cannot be indemnified from the structure or entity — where indemnification is not permitted, not available, or the entity cannot pay. Because fiduciary exposure is fundamentally personal, Side A protection is not an optional refinement but the part of the programme that actually stands between a claim and the individual's own assets. Its presence, and whether its limit is adequate, is among the first things to establish in any arrangement covering trustees or family-office principals.

Run-off cover

Fiduciary claims can arise long after a person has left the role. Most policies operate on a claims-made basis, responding to claims brought while the policy is live, so cover can fall away when a role ends even though the decisions taken during it remain open to challenge for years. Run-off cover extends protection for claims made after a person steps down that relate to their conduct while in office. Arranging it at the point of departure — on retirement, on resignation, on the winding-up of a structure — is what keeps a former trustee or administrator protected against a claim that surfaces later.

Personal assets, not the structure's

The thread running through all of this is that the risk is personal. A trustee or foundation administrator is pursued in their own name, and it is their house, investments and savings that a judgment reaches, not the assets of the trust or foundation being administered. That is the reason this cover is treated as a personal risk to be arranged deliberately, rather than assumed to be absorbed by the structure or by whatever corporate policy happens to exist.

Who needs to consider this, and when

The people who should weigh this are individual trustees, members of a foundation board or council, and the principals and senior staff of a family office, along with the professionals — lawyers, private bankers, trust-company officers — who accept such roles alongside their own practice. The moment to arrange cover is when the role is accepted or the structure is established, before decisions with lasting consequences are made, and to review it whenever the assets, the structure or the jurisdictions involved change. Whether a particular role carries fiduciary duties, and how far they extend, is a legal question that belongs with the reader's own advisers; the cover is arranged around the answer, not in place of it.

This article is provided for general information and does not constitute personalised, legal or tax advice; the right cover depends on your own circumstances. Whether a role carries fiduciary duties, the governing law of a structure and the forum for a dispute are legal matters for your own advisers. Adler & Rochefort is a commercial brand of Ownizo Unipessoal LDA, mediador registado na ASF n.º 425591790/3.