Deceased Estate - does the Will or the Trust have final say?

[Taryn]

Hi,
This is a bit of a curly one but I just wondered if anyone can help with the following queries;

My Mum's share of a property that was held in a family trust is being sold and the funds will shortly be coming into the Trust she set up. The Will states the trust is to share the money equally between her siblings if they are still alive or over 20 which they all are. However now one of the Trustees is considering distributing the money to the children of the family members instead of to the direct children. What would be the grounds that this could be considered and does the family trust have power to go against the requests in a Will?

Can there be anything done to put a hold on allowing the Trustee to release funds so that this can be fairly reviewed before it is too late?

Sad questions to even have to ask...

[artemis]

IANAL but ... once property (real estate or otherwise) goes into a trust it is no longer owned by the settlor (your Mum in this case). So what happens to the property depends on the terms of the trust deed and the decisions of the trustees within those terms and within the law.

[Taryn]

Thanks for your response Artemis. Shame to think that a Trustee can go against that which the person in the Will stated the Trustee is to do. You can't put any type of "freeze" on a Trust can you so that there is time to seek Legal Advice before the funds are released?

[cube]

From memory, when we put our Family Trust together there were the wills, which left everything to the Trust and an 'Expression of Wishes' to guide the trustees as to our intentions for the assets after we're gone.

However, as the language implies, they are 'wishes' and 'guidance' only, not necessarily binding on the Trustees whose role remains to do their best for the beneficiaries, so if circumstances change they have the freedom to go against our stated 'wishes'.

[Winston001]

Yes a beneficiary (or your mother's executor) can obtain an interim injunction to prevent the Trustees from making distributions until the full arguments can be heard.

The trustees are bound by the Deed of Trust but assuming its a discretionary trust (the most common) the wording will be wide. There may also be a Memorandum of Wishes made by your mother at the time the trust was created - but possibly not. Opinions differ as to the wisdom of such a Memorandum because it hampers the Trustees when unforeseen events occur.

My guess is that your mother's will had clauses in which she exercised her power of appointment in the trust, and directed the trustees to distribute to specific beneficiaries. It sounds like a breach of trust to ignore those directions.

This is a situation where everyone should sit down with the trust and the estate lawyers and clear the air. Conflicts of this nature can poison a family for years.

[donna]

It's obvious why they'd want it done - the beneficaries' kids would be too young so the shares would remain in the Trust - so the Trustees' argument is they are 'protecting the assets' of the Trust. Seems quite scary that your Mem. of Wishes and Will could be ignored aye.

Taryn, please let us know how it turns out.....many of us here have Trusts.

cheers,

Donna

[Rosco]

Hi,
This is a bit of a curly one but I just wondered if anyone can help with the following queries;

My Mum's share of a property that was held in a family trust is being sold and the funds will shortly be coming into the Trust she set up. The Will states the trust is to share the money equally between her siblings if they are still alive or over 20 which they all are. However now one of the Trustees is considering distributing the money to the children of the family members instead of to the direct children. What would be the grounds that this could be considered and does the family trust have power to go against the requests in a Will?

Can there be anything done to put a hold on allowing the Trustee to release funds so that this can be fairly reviewed before it is too late?

Sad questions to even have to ask...

HI Taryn,

As others have pointed out, the Will is meaningless if the assets are already in the Trust.

Just a general point, I think the Trustee's should be trying to hold the assets in the Trust for the benefit of the benificiaries and not distributed to the children or grandchildren. Many Trusts are wound up when the settlors die, but a Trust is actually designed and expected to continue to hold the assets for the benefit of the remaining beneficiaies. But unfortunately what happens quite often is that the children of the settlor don't understand Trusts and just want to get their hands on the money.

If you do have a problem with a Trust, first thing I would do is work out what happened to the power of appointment. Generally the settlor, your mum, would have held the power of appointorship and might have passed this to someone else in her will. If for example, you now had the power of appointment you could sack the Trustee and appoint a new ones. The power of appointorship holds the ultimate power in a Trust!

Ross

[Taryn]

Thank you so much everyone for taking the time to share your expertise with me. 'Rosco' I am aware that the Power of Appointorship holds the ultimate power in the Trust but I don't have a copy of the Trust to see who it is and it does not state anything about this in the Will. As a beneficiary am I allowed to ask for a copy of the Trust and are they obliged to provide me with one?

I also like your point about the reason for a Trust and I am keen for this property to remain in the Trust as an ongoing asset but the property is part shared by another Trust and they now would like to sell. It has been many years since Mum passed away so to have to go through paperwork like her Will again is a bit yuk.

The assets were in her Trust prior to her passing and the Will states that the Trustees are to divide the sale proceeds equally amongst her children who will survive her and that is why I am surprised that they would want to go against her wishes (one being a professional trustee). We are all pretty stock standard adults, financially stable and not in any trouble with the law so it is a bit strange to me (and a bit scary as you say Donna as I know I hold properties in Trusts and it shows the importance of not only the Trustees you put in place, but the wording of the Trust and who has the Power of Appointership).

Thanks Winston about the interim injunction and I will look into what this involves after Easter break - may buy us some time until we can see what is behind all this.

Thanks again everyone and I will keep you posted.

[Rosco]

Yes, the Trustees should be happy to provide you with a copy of the Trust Deed.

Ross

[epsomtax]

Thank you so much everyone for taking the time to share your expertise with me. 'Rosco' I am aware that the Power of Appointorship holds the ultimate power in the Trust but I don't have a copy of the Trust to see who it is and it does not state anything about this in the Will. As a beneficiary am I allowed to ask for a copy of the Trust and are they obliged to provide me with one?

Thanks again everyone and I will keep you posted.

Further to Rosco's comment, as a beneficiary you have certain rights which, although not explicitly stated, are generally embodied in case law as follows:

It is generally accepted that beneficiaries are entitled to see:
· Financial statements and accounts, including details of assets and liabilities of the trust
· Details of capital and income distributions
· Copies of the deeds appointing trustees
· Full names of all past and present trustees
· Any deeds or documents which constitute or vary the terms of the trust/s
But, they aren’t generally entitled to see/know:
· The trustees’ reasons for varying, partially distributing or resettling a trust
· The trustee’s change in policy with respect to distributions to beneficiaries
· Any letters or memoranda of wishes from the settlor/s

If you want some good reading on Trusts, written for a lay-person, Google "Janet Xuccoa's book Family Trusts 101". It costs about $30 or so but you'll find it very helpful.

[JeremyOlm]

I think that this is actually a pretty obvious statement in addition to the wonderful advice that's already been given, but do find an estate agent or lawyer who can legally help to represent your wishes or speak to the trustees on your behalf. Hopefully it doesn't get to the point where things have to be mitigated in that way, but always good to have someone professional help you out in that regard.

[Ivan McIntosh]

But make sure they are looking to constructively resolve any dispute first rather than going straight to court (any necessary freezing order aside). These matters can chew up a life, best to give it every possible shot of being resolved in a way that keeps family relationships together. Someone who can guide you to such a resolution, rather than imposing one, is to be preferred.

[Perry]

Here's a good example of how a (discretionary) Trust could have been better.

Bankrupted son denied inheritance, money goes to creditors
10 August 2015

A man whose parents died in a car crash has lost his fight to keep his inheritance
out of the pockets of his creditors. Warren Sutton lost his appeal in the High Court
to redirect his inheritance to his children. He was an undischarged bankrupt at the
time of his father's death.

[speights boy]

Good to see the creditors win.

[Perry]

Disagree strongly.