Nine really important things trustees need to know

If trustees don’t perform their duties to the required high levels they can face anxious times dealing with criticism from beneficiaries and in the worst case may be personally liable to beneficiaries.

A Court of Appeal decision described the actions taken by trustees to remedy “an obvious inequality” in the deceased’s Will, as an improper use of their powers.  The Will deliberately excluded certain family members from sharing in the income from the Estate.  This was viewed as unfair and inappropriate by the widow (who was a beneficiary of the Will) The trustees distributed $250,000 of the estate’s capital to the widow under another clause which gave them the discretion to do so. The widow then lent this amount to a trust for the benefit of those who had been excluded.

In the Court of Appeal’s view the unconcealed and predetermined notion that the trustees would use one clause to avoid the effect of another was an improper motive for the use of their powers.  The Court held that if the sum of $250,000 plus interest could not be restored from the trust, the Court would be prepared to enter judgment against the trustees personally.

Here are some tips to help you, as a trustee, comply with your obligations and avoid exposure to personal liability:

Act in accordance with the Trust Deed or Will

Trustees must act in accordance with the Trust Deed or Will.  As a minimum, trustees must take time to read and understand the terms of the Trust Deed or Will.

Keep a record of the beneficiaries of the trust

Trustees must keep a record of who can benefit from the trust.  This includes keeping a record of any changes to the beneficiaries through death, marriage or birth.

Meet with the other trustees

Trustees must formally meet with each other at least once a year to review the current status of the trust’s assets and investments and to review the needs of the beneficiaries.

Keep accurate records

Trustees must keep accurate and up to date records.  This includes ensuring that all decisions of trustees are recorded in minutes.

Keep accurate accounts

Trustees must keep separate and up to date accounts for the trust.  Specific rules relating to trustees’ accounting obligations are normally contained in the trust deed and must be complied with.

Compliance with the Trusts Act 2019

Trustees must comply with the Trusts Act 2019, which amongst other matters, sets out specific duties that a trustee has when investing.

Comply with tax obligations

Trustees must ensure the trust’s tax obligations are complied with and should seek specialist accounting advice where appropriate in order to maximise any potential tax savings.

Act without personal profit

Trustees must not benefit personally from being a trustee.  They may be entitled to be paid for reasonable expenses incurred in carrying out their role as trustee if the trust deed allows for it.

Seek professional advice

If in doubt, seek professional advice.  However, it is important to note that trustees must not delegate their duties unless the trust deed clearly allows this or it is permitted in statute.