Independent Trustee needed

[kyotolaw]

I'm sick of the lawyer who set up our family trust taking his sweet time to getting around to approving transactions I recommend for the trust.

Taking 3 week holidays without telling me first is also getting annoying.

He charges like a wounded bull also.

Anyone have any good advice or recommendations for an independent trustee who isn't quite so independent?

Getting a family friend would probably be the best answer - I just don't want to lay out our financials to someone we know well.

[CJ]

You could go to a corporate trustee. It is a separate legal entity so is 'independent' even if owned 100% by you.

[kyotolaw]

I know that's allowed, but I'm particularly keen for it not to be accused of being a sham trust.

Also worried about costs - wouldn't you need to charge fees as a corporate trustee so that company has an activity. And wouldn't that then require a tax return and accountants fees?

Maybe I'm being paranoid, but I'd rather be well clear of the potential for anyone to question my structures.

[CJ]

I dont have a corporate trustee so dont know. I assume you wouldn't charge fees (trustees cant charge unless working in a professional capacity). No income means no reason to register with the IRD (dont even have to get an IRD no???

[kyotolaw]

I guess the real question is if the company that is the corporate trustee is owned by the settlors, and the settlors are also trustees, doesn't that effectively mean that the trust is potentially a sham trust?

It doesn't seem different to me from not having an independent trustee.

Or is there a point in law which makes a settlor-controlled corporate trustee as an independent trustee better than no other trustee?

[Tan]

If you have no need for the trustee to give advice, surely you know someone who can just "close their eyes and sign" where you point?

BTW, my trustee, a family friend, seems to go on holiday whenever I am about to buy, sell or need her signature for something! Not that they holiday often, but it can happen to anyone, anytime. She leaves a POA if it looks like it might be needed. Once you have one POA, you can copy the format for the future when needed.

But then, I don't really care who knows my stuff. As long as she is not telling me off or offering stupid unsolicited advice. She is obviously thoughtful about this, having a trust herself.

[Bluekiwi]

Mike Vallant, from Vallant Hooker & Partners.

Might take - a little time - but his Legal exec. is lightening fast.

[Perry]

Is your accountant not
an available option?
.

[Rosco]

I personally would not use a family friend or family member. Trustees can become personally liable for the trust debts. If the Trustee is not actively involved in the day to day decision making, and understands their risk, then they shouldn't be a trustee. Imagine if something went horribly wrong, and somehow your friend was liable for several hundred thousand, and then ended up losing their house! With investment properties the risk is quite low, but still possible.

With the corporate trustee recommended above, often you would be the director, but over 25% of the shares would be owned by an independent person. This person is just a shareholder, so has no Trustee risk, but they give independence as the must approve any major decisions.

Ross

[Tan]

Trustees can become personally liable for the trust debts.

My trustee always ensures "the clause" limiting her liability is in the documents she signs. As I will when I am Mum & Dad's trustee soon. My lawyer has said I can use this even though I am a family member, and quite honestly, I wouldn't be trustee without it.

[Wayne]

If you have no need for the trustee to give advice, surely you know someone who can just "close their eyes and sign" where you point?

BTW, my trustee, a family friend, seems to go on holiday whenever I am about to buy, sell or need her signature for something! Not that they holiday often, but it can happen to anyone, anytime. She leaves a POA if it looks like it might be needed. Once you have one POA, you can copy the format for the future when needed.

But then, I don't really care who knows my stuff. As long as she is not telling me off or offering stupid unsolicited advice. She is obviously thoughtful about this, having a trust herself.

Given wha the trustee is responsible for and can be held accountable for I wouldn't be a trustee for anything I didn't have a great deal of control over.

[Wayne]

My trustee always ensures "the clause" limiting her liability is in the documents she signs. As I will when I am Mum & Dad's trustee soon. My lawyer has said I can use this even though I am a family member, and quite honestly, I wouldn't be trustee without it.

does a 'clause' limiting you statutory responsibility actually work or does it make people feel it works? If the trustee is just rubber stamping everything while limiting their accountability is this not a sham trustee and will it not then leave things open for the trust to be a seen as a sham?

[Xav]

does a 'clause' limiting you statutory responsibility actually work or does it make people feel it works?

They do work however are usually subject to some limitations which are specified in the clause (eg. fraud).

If the trustee is just rubber stamping everything while limiting their accountability is this not a sham trustee and will it not then leave things open for the trust to be a seen as a sham?

Possibly. That is a somewhat uncertain area currently. It would certainly be a relevant consideration.

[Rosco]

Generally limited liability only works with the bank. So most banks give the independent trustee a clause that there liability to the bank is limited to the assets of the Trust.

But what about other creditors?

Most people look at property investment and think the only major creditor could be a bank, so therefore the risk of other creditors is very small.

But what about IRD. Independent Trustee's have no limited liability against IRD. If a Trust claims GST, and then forgets to pay it on a sale, then the independent Trustee could be jointly liable for this GST along with the other trustees. If the Independent Trustee didn't know about the transaction that isn't a defence, because as Trustee they should have know.

Be very very carefuly being a trustee in your personal name! Like I said before and someone else touched on it to, you would need control.

Ross