So, you have been asked to be a trustee of a family trust. Sensibly you want to know exactly what the job entails before you agree.
Being a trustee of a trust is an important job. It is a compliment to be asked because obviously the person asking thinks you have the ability to do the job. However, it’s a job with a lot of responsibility, so you need to weigh up carefully whether you want to take it on.
There are responsibilities imposed both by the Statute and that have been developed over time through Case Law. The New Zealand Law Commission has in recent times been reviewing the law of trusts in New Zealand. In 2011 it included a summary of the duties of trustees in its discussion paper. Those duties are set out below.
11 important things to know if you accept the job of trustee
- Know and understand the trust deed, and associated documentation, and be familiar with all of the trust property. This means that you need to read the trust deed and associated documents and understand the same. If you don’t understand what something means ask the trust’s lawyer. You need to know what the assets and liabilities of the trust are as soon as possible after you are appointed.
- Abide by the trust terms which will be set out in the trust deed.
- Maintain impartiality between beneficiaries when managing or distributing trust property. This means you need to be even handed in your dealings with beneficiaries and can’t favour one over others.
- Act in the beneficiaries’ best interests including those who are not yet born. This includes their financial interest but also their non-financial interest. You therefore need to have a good knowledge of the various beneficiaries’ circumstances.
- Not profit personally from your position as a trustee. You must act voluntarily without benefit and without payment for your circumstances, except in specified circumstances. For example, out-of-pocket expenses will normally be reimbursable, however generally trustees may not charge for their time with the exception of professional trustees e.g. lawyers or accountants.
- Invest the trust’s property and various investments from time to time exercising a level of care, diligence and skill a prudent business person would when managing the affairs of another person. If you are a professional , then the standard is higher. A professional trustee must exercise the level of care, diligence and skill a prudent person engaged in that profession, employment or business would exercise.
- Not delegate decision making powers, not even to co-trustees.
- Actively participate as a trustee. You cannot rely on your other trustees to carry out your role for you.
- Act unanimously unless the trust deed says otherwise.
- Pay the correct beneficiaries. You will be liable if you wrongly pay people who are not beneficiaries.
- Keep proper accounts and give information as required. The type of information that can be given out has been an area of debate, however it seems fairly settled now that details of trust assets and liabilities, financial statements and the trust documents themselves should be made available to beneficiaries if requested. Beneficiaries are not usually entitled to trustees’ reasons for decisions.
If you still have queries regarding the job of trustee it would be wise to take advice before you agree to take it on. Our Trusts team are happy to answer your questions, so please contact us for more information.
Our thanks to Vanessa Crosby for writing this article