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How to Choose a Trustee

A trustee is a person or a corporation that has been selected to manage a property that is held in trust. A trust is created when one person (the trustee) holds a property for the benefit of another third party (the beneficiary).

23 June 2016
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Why Get A Trust?

There are several reasons and benefits for getting a trust, including:

  • Investment purposes through providing tax advantages

  • Retaining rights and management of the property - a common scenario where a trust exists is when the owner is incapable of looking after the property and making decisions relating to it, or if it would not be in their best interests to do so.

  • Retained ownership - the beneficiary still owns the property and as the trustee has a duty to act in the beneficiary's best interests it provides a valuable and fair environment for both parties.

Trustee-Beneficiary Relationship

It may sound obvious, but the relationship between a trustee and beneficiary should be one of trust. While the law states that the trustee is a fiduciary of the beneficiary, meaning that the trustee is bound by law act in the best interests of the beneficiary, it is no doubt preferred that this relationship is managed healthily and fairly, without having to involve the courts.

Make sure that your assigned trustee is someone whom you have implicit trust and confidence in and can place reliance on. Typically this will be a family member or close friend.

Typical Duties

As the person that you appoint as your trustee will be responsible for managing often your most precious asset, it’s important that both parties are aware of the basic and typical duties that a trustee will undertake.

These include:

 

  • Managing your assets

  • Paying expenses or debts

  • Taking reasonable care in dealing with investments

  • Distributing what money/assets are left to your beneficiaries

  • Obtaining advice

  • Keeping Accounts

  • Avoiding decisions that attract personal profit

Trustee Considerations

Before you choose your trustee, there are several practical questions to ask that will help ascertain whether not only are they a person you trust, have confidence in and can rely upon, but also whether it’s suitable and realistic that they can take on the role of becoming your trustee.

Such questions to ask, include:

  • Do they live nearby? Will they have to travel far to help with matters?

  • Do they have the available time to undertake the role?

  • Does the person have any financial knowledge and experience in handling accounts?

  • Is the person of an age where they can physically undertake the duties required?

  • Is the person capable of handling any conflicts that may arise with other beneficiaries?

For more information on trustees and the laws relating to the trustee-beneficiary relationship, contact Guillaumes today.