What on earth is a trustee?

TRUSTEES14 August 2013Brain Injury Awareness WeekPresented by:David FabbroPartner, Andersons Solicitors

What on earth is a trustee? • A trustee is a person who promises to look after money or assets for certain persons or purposes. • A trustee puts their name on the title to an asset and owns it in a legal sense • A trustee does not really own it because of they are bound to their promise • The law imposes a duty on the trustee’s conscience to look after the money or the assets (“the fund”). • These obligations are often called equitable obligations.

Different types of trustees • Trusts come up in a variety of circumstances including: • As part of a person’s last Will and testament; • For the protection or management of family assets(“a family trust”); • For business and tax planning; • Superannuation funds; and • Importantly a trust often arises where a person is unable to manage their own financial affairs and someone is appointed to manage those funds on their behalf; and • As part of a gift made to look after people during their life; or • In a number of other legal contexts imposed by law

Trusts for incapacitated persons • Most Courts are able to make orders about compensation payable in the case to a person who is incapacitated • Whoever is running the case for that or another interested person can make an application • Where there is no lawsuit, the Guardianship Board may appoint an administrator over a person’s estate if there is an issue regarding the person’s mental capacity.

Trusts for incapacitated persons (continued) • The types of people who can be appointed as an administrator (which is like a trustee or power of attorney) are: • The Public Trustee; • Trustee companies; or • Any natural person or persons who the Board thinks is suitable to act as administrator. • Where a person dies without a Will and one of the heirs is incapacitated (or a minor), the Public Trustee may need to receive and be the trustee for that heirs’ share of the estate.

Other Trusts • The situation is different for trusts that are established prior to an incapacity or by another person for the incapacitated person and/or others. • In these types of trust the person who establishing the trust gets to choose who the trustee is and how replacement trustees might be selected. There can be more than one trustee appointed.

Other trusts (continued) • An Enduring Power of Attorney is similar to a trust and many of the same principles apply, even though it is not technically a trust. • The Attorney appointed under an Enduring Power of Attorney will normally have duties to look after the funds. • The gifts made in a Will are also trusts and the executor of a Will would be the trustee for those gifts.

Special Disability Trusts • There is a special class of trusts which assist people with disabilities, known as Special Disability Trust. • An SDT involves a family member creating a trust for the benefit of a person with a severe disability. An SDT will often be made as part of family member’s Will. • With an SDT, a certain amount of funds can be held for the purposes of accommodation and some domestic expenses. • After the death of the person who is the beneficiary of the SDT, the funds can be divided up amongst other family members.

Trustee Responsibilities • The key duties of a trustee are: • To understand and follow the terms upon which they have been appointed; • To look after the trust fund, which may require that the funds be invested; • To be faithful to the beneficiaries of the Trust, including avoiding a conflict of any interest; and • To keep account of what the trustee does with the fund and provide accounts where appropriate.

Trustee Responsibilities (continued) • A trustee, administrator or Power of Attorney cannot: • Make a gift to themselves from the fund; • Buy or benefit from the fund without the approval of the Court (exceptions apply); • Favour one beneficiary over another; • Borrow monies on behalf of the fund, except where provided by law; or, • Whilst acting as trustee, allow another person to make decisions for them.

Changing a Trustee • Where the Public Trustee has been appointed, the nature of the appointment will determine whether or not it can be removed as trustee. • If the trust arises through a Will or it is a family trust or other trust involving a trust Deed, then the trust deed will specify how a trustee might be changed.

Changing a Trustee (continued) • Where an administrator has been appointed by the Guardianship Board, then an application may be made to the Guardianship Board to vary or revoke an administration order and in doing so have a new administrator appointed. • This would typically require a person to show that there has been some form of misconduct by the administrator. • In the Trustee Act there are other provisions in some cases where no mechanism is provided for the change of a trustee.

Working with trustees • Public Trustee • Delays are often frustrating when dealing with a government department such as the Public Trustee; • If it appears no action is occurring them a complaint may be required, firstly that should be to the Public Trustee, after that the Ombudsman or Public Advocate; • All communications should be in writing and retained for future reference; • Decisions may be made that you don’t like but ultimately a trustee has discretion and ideally are looking out for the incapacitated persons best interests, not necessarily yours.

Working with trustees (continued) • Private trustee company • Similar to the Public Trustee; • Private companies are not formed by government, your complaints should be discussed at a Management level first to see if that solves any particular problem or issue; • Perhaps ask for a meeting or conference so that all parties can partake in discussions about certain arrangements that should be in place for the incapacitated person

Working with trustees (continued) • Family trustee/administrator • These are perhaps some of the most difficult arrangements to deal with; • As a trustee that family member must be impartial and act in the best interests of the beneficiary; • Often discussions with family members about a trust is not done in writing, that makes it difficult to prove at a later point what was discussed/agreed.

Conclusion • The best advice is to try and work with the trustee, not against them! • Thanks to Greg Weldon and Travis LeRiche of our commercial team for assisting with the preparation of this presentation.

Thanks! Want to know more? Make contact: David Fabbro Partner Andersons Solicitors Phone: 8238 6658 Email: dfabbro@andersons.com.au Twitter: @andersons_sols Blog: http://andersons.com.au/lawtalk.aspx Facebook: Andersons Solicitors This information is not intended as legal advice and should not be substituted for legal advice. The information contained in this article is current at the time of publication – August 2013

What on earth is a trustee?