Family / Discretionary Trust succession
Assets held in your Family Trust do not form part of “your estate” which is gifted under the provisions of your Will.
Your Family Trust will generally continue to have “life” after your death.
Therefore you need to carefully consider the succession of those who will control the trust after your death. Particularly, this means considering who you will want to appoint as:
- Trustee – if the Trustee is an individual or individuals who will take their place following your death? If the trustee is a corporation, who will be the shareholders and directors of that corporation following your death? Has the Constitution of that Corporation been updated to allow for only one officeholder and shareholder?
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Appointor/ Principal – this is the person in the trust with the power to hire and fire the trustee. Who will hold this power following your death? They will have power to determine who takes the wealth within the trust.
Most Discretionary / Family Trusts provide the trustee with very broad discretionary powers of how the income and capital of the trust is distributed. Therefore, those with the power to make such decisions must be consistent with those you ultimately intend to benefit.
Of equal importance is to look at the assets and liabilities of the trust and particularly, any loan accounts that have been established for family members, and how this will impact on assets of the trust being shared between family members.
Your estate plan should include a review of your Discretionary / Family Trust and at the very least, a consideration of these matters.
on February 20th, 2007 at 7:20 pm
A father and son are 50/50 directors of a company, which is a trustee of a family trust. However, with opposing objectives for use of profits, the father always has final say and this is causing problems.
Can this problem be solved by the son setting up his own separate trust through which 50% of profits are channelled for him to control?
Response: No. There are quite a number of issues, not the least of which is deciding how much profit is distributed and how much is reinvested in the business before you get to how the profit is actually distributed. A consultation with your local lawyer is needed.
It is an unwritten rule that every decision goes the father’s way if they have opposing views to decisions?
Response: No
Regards
Onlinelegal
on February 20th, 2007 at 10:52 pm
I have been doing some reading on income streaming within a trust. Could the solution to my previous dilemma be solved within the trust by dividing assets and their income within the trust?
Response:
No. Streaming is at the discretion of the trustee and the trustee is having problems making decisions. Extreme care must be taken that you do not, “fetter the trustee’s discretion” or resettle a trust with adverse duty and tax consequences. There are some trust splitting strategies available. I strongly recommend that you take some specific legal advice.
Regards
Onlinelegal
on December 3rd, 2007 at 11:56 am
I have co signed for a loan as part of the Trustees, however the property has been signed under my brothers name only.
Was lead to believe my Father had full knowledge of the purchase, Father currently has no knowledge of property being in one name.
If I am liable for the loan as part of the Trustees, should the property be in the name of the Trustees?