A trust
is defined as :
An equitable
obligation binding a person (who is called the trustee) to deal with property
over which he/she has control (which is called the trust property) for
the benefit of persons (who are called the beneficiaries) of whom he/she
may be one, and any one of whom may enforce the obligation. (Underhill
-" Law of Trusts.") Appointment
of Trustees
A trustee
may be appointed in the following manner :
- by the settlor (a person who provides the funds for the benefit
of another).
- by the beneficiaries
- by a person with a power to appoint, whether
express or statutory. (power may be conferred in the trust instrument
or arise by way of the operation of the Trustee Act when the trustee
is dead or remains out of the State or desires to be discharged, or
refuses or is unfit to act).
- by the Court.
Creation
of Trusts
Some of the
most common forms of trusts are :
1) Testamentary
trusts
A testamentary
trust is established by will and only becomes operative on the death of
the testator. Examples of these trusts include life interests, funds held
for minor beneficiaries and funds held in perpetuity to provide educational
scholarships or grants to charitable organizations. The most common forms
of life interest estates involve giving a person (the life tenant), subject
to certain obligations, the rights to real estate (may involve the wider
benefit of residence and the right to receive the net rents or limited
to personal occupation only) for his/her lifetime and, on death, to a nominated
person(s) called the remainderman. Another form of life interest is the creation of a fund to provide
income, usually for a family member, for life with the capital fund passing
to the remainder beneficiaries on death.
2)
Inter vivos trusts
An inter
vivos trust is created between living persons with the settlor effecting
a settlement to benefit a nominated beneficiary. On the establishment
of the trust, the settlement funds/property are no longer assets of the
settlor and do not form part of his/her personal estate. The purpose of
the trust may be to provide financial assistance by way of regular or
discretionary payments to the beneficiary. There also may be provision
in the trust deed for the payment of the beneficiary's funeral and memorial
expenses. The balance of the trust then remaining may pass to either the
beneficiary's estate or other nominated beneficiaries.
3)
Superannuation trusts
When the trustees of a superannuation fund
elect to pay an employee's death benefits to minor children, the trustees
usually appoint a trustee to administer the trust funds during the minority
of the beneficiaries.
4)
Court trusts
In proceedings
for damages resulting from personal injury such as that arising from motor
vehicle accidents or for compensation for victims of crime, the Court
may appoint a trustee and direct that the award monies be held in trust
by the trustee for the benefit of the beneficiary. The Order may direct
that the funds be paid to the beneficiary on him/her attaining 18 years
or for an indeterminate time pending a further order of the Court.
5) New
trustee
Where the original or substituted trustee wishes to retire
from the trusteeship or is incapable of carrying out the duties of his/her
office. a new trustee must be appointed to continue the administration
of the trust. The power to appoint a new trustee may be conferred in the
trust instrument or it may be effected by operation of Section 14 of the
Trustee Act. Public Trustee may be appointed as a new Trustee
Duties and Powers
of Trustees
A trustee
has a primary duty to act according to the provisions of the trust instrument
and a fundamental duty to preserve the value of trust assets. A trustee
has, generally speaking, power to do all acts necessary for the protection
and administration of the trust property. Apart from the powers contained
in the trust instrument, a trustee has certain statutory and implied powers.
Subject to the provisions of the trust instrument, some of the powers
are discretionary, and other powers may only be exercised with the consent
of the Court. These powers include the power to prudently invest the trust
funds and the power to advance funds for the maintenance, education and
benefit of the beneficiary. Where the trust includes real estate, the
trustee has the power to insure and repair the trust property. Subject
to any contrary directions in the trust instrument, the Trustee must prudently
invest the trust funds.In making investment decisions, the trustee must
have regard to the fifteen factors set out in Section 9 of the Trustee
Act, including the purposes of the trust and the needs and circumstances
of the beneficiaries, the probable duration of the trust, diversification
within and across the asset classes and the need to maintain the real
value of the capital and income. It is important to note that Section
8 imposes a duty on a trustee to act impartially towards beneficiaries,
and in the best interests of all present and future beneficiaries. In
life interest estates, a trustee must implement an investment strategy
that produces equity between the income needs of the life tenant, and
the need for capital growth for the remaindermen.
Public Trustee's
Common Funds are used to ensure that the appropriate level of risk management
is in place and that the diversification afforded by the Standard Investment
Strategies is available to each and every trust. As trustee, Public Trustee
must ensure that no undue risk is either introduced or retained in an
investment portfolio, and that sufficient diversification is in place.
For more information on the investment of trust funds, please click on
Public Trustee Funds Management Service.
A trustee
also has the power to apply to Court for advice and direction on any matter
relating to the administration of the trust.
Examples Of Some Of The Common Powers And Directions
Some of
the common discretionary powers contained in trust instruments include
: - power to advance income (and capital) for the maintenance education
and benefit of the beneficiary.
- power to pay maintenance to a guardian
or person having custody of an infant power to purchase a dwelling house
for the beneficiary to use as a residence.
- power to purchase alternate
accommodation to meet the beneficiary's special needs power to
pay secondary or tertiary education fees
- power to pay funeral and memorial
expenses.
A trustee may also appoint a guardian(s) for infant children hold the assets in
trust for life or for a specified period (e.g until a beneficiary attains
21,25 or 30 years of age) or establish trust funds for several children,
which could include more than one trust fund for each child with different
vesting dates (e.g pay out one fund at 21 and the other at 30 years).
There are adverse tax implications where trust funds are held contingent
on attaining an older age,because of the low tax threshold and the fact
that the income is assessed to the trustee at the top marginal rate.
WHY APPOINT PUBLIC TRUSTEE AS YOUR TRUSTEE?
Being a trustee
is both demanding and onerous. It requires a good understanding of legal,
accounting, investment and taxation matters. You also need a trustee who
is able and willing to fulfil the term of appointment. If you appoint
an individual, he or she may predecease or be unfit, unwilling or incapable
of carrying out this exacting task. Because the trustee is often required
to manage assets over a long period, the need for permanency and financial
management skills is essential. Public Trustee will always be there for
you. As your trustee, Public Trustee will administer your trust competently,
impartially and with empathy.
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