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THE TEN COMMANDMENTS FOR TRUSTEES

Are you a trustee of a trust or will? Are you aware of your duties under the law and the relevant trust document? If not, read on.

In brief terms, trustees are persons who own and "look after" assets for the persons entitled to benefit from those assets (the beneficiaries). 

Trustees must be aware that beneficiaries of a trust are entitled to request information from, and can make claims against, trustees. Trustees who are unaware of their powers and duties in respect of the trust are particularly at risk in these situations.

Trustees must also be aware that if they have transferred assets (most commonly, the family home) from their personal names to themselves as trustees, those assets are now trust assets. All trust assets must be dealt with under the "rules" set out in the trust deed, taking in to account the interests of the beneficiaries.

In order to avoid disputes and claims, it is essential that trustees are actively involved in the running of the trust and understand their role.

The key duties of trustees are:

  1. To always act and make decisions in the best interests of the beneficiaries - this should be the paramount consideration of the trustees at all times. 
     
  2. To remain impartial between beneficiaries when managing or distributing the trust assets - this does not necessarily mean that all beneficiaries receive an equal share, but places the onus on the trustees to consider all the beneficiaries equally.
     
  3. To benefit the beneficiaries - trustees will be liable if they wrongly benefit people who are not beneficiaries.
     
  4. To act unanimously - unless the trust deed provides otherwise, the trustees must make decisions together.
     
  5. To actively participate as trustee - a trustee cannot "sit back" and rely on his/her co-trustees to make the decisions.
     
  6. To understand and comply withthe terms of the trust deed, other trust documents and the Trustee Act 1956.

    NOTE: The New Zealand Law Commission reviewed the law of Trusts in New Zealand and tabled a report in Parliament on 11 September 2013. The report makes recommendations for the introduction of a new Trusts Act to replace the current Trustee Act 1956.Parliament is yet to issue a formal response to the report.
     
  7. To invest and manage the trust assets with care, diligence and skill - as a prudent business person would. Professional trustees are held to a higher standard and must exercise the level of care, diligence and skill a prudent person engaged in that profession would exercise.
     
  8. To not profit personally from their position as trustee - this requires trustees to act voluntarily and without payment for their services, except in specific circumstances.
     
  9. Not to delegate their decision-making powers, except in very specific circumstances (i.e.: where a trustee is overseas or physically unable to participate).
     
  10. To keep proper records and give information as required if that information is necessary to ensure that the trustees have acted properly. 

The above duties apply regardless of whether you are a trustee of a family trust or an executor/trustee appointed under a will.

If you have any queries about your duties as a trustee, contact Brooke Courtney - brooke.courtney@sharptudhope.co.nz

Written by Brooke Courtney at 09:00
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