Thought about your Family Trust recently?

When was the last time you gave any thought to your Family Trust? Here’s what you might not know about how to look after it successfully…

It’s not enough to simply establish a family trust, like any venture it will need to be tended to if you want it to succeed. Increasingly we are seeing family trusts struggle to perform the task they are set up to do – protect your family’s assets now and in the future.

Family trusts are being challenged successfully in the Courts due to a failure by trustees to properly administer the trust. If the affairs of a family trust have not been administered appropriately, the Courts are likely to consider it an ‘alter ego’, ‘sham’ or ‘illusory’ trust and allow creditors to attack the assets of the trust as if they were personal assets.

As a trustee, you have a number of duties – one of which is to meet with the other trustees at least annually to review the position of the family trust (ie. the annual trustees meeting). This meeting is essential in order to maintain the integrity of the trust.

We recommend that you set an annual date for the trustees meeting and make that happen – without fail!   The meeting need not be in person – a conference call or Skype meeting can be just as effective.

At the very least, your meeting should cover the following agenda items:

• Trust Relevance:
  • Is the trust still relevant

• Trust Deed Review:
  • Does the trust deed still meet the needs and objectives of the trust?

• Review the Trust Assets:
  • Take stock of the trust’s assets.
  • Has the acquisition and disposition of assets by the trust been properly recorded in all cases?
  • Is the ownership of the trust’s assets recorded correctly?
  • Have any further advancements been made to the trust since the last review? If so, are they gifts or loans? An advancement may include activities such as:
    • alterations or improvements carried out to a trust asset (such as a house), but which has been financed by somebody other than the trust itself; or
    • considerable landscaping work carried out to a trust property, but which has been financed by somebody other than the trust itself.
  • Are all the trust’s assets adequately insured?

• Review Trust Debts:
  • What are the current outstanding debt balances owing by the trust?
  • Are the terms of all those debts properly recorded?
  • Is it appropriate for any of those debts to be forgiven, whether partially or in full?
  • Has each gift and debt forgiveness made since the last review been properly recorded?

• Review Trust Records
  • Are all the records of the trust safely and securely stored in an orderly manner in a readily accessible place known to all trustees?
  • Have all decisions regarding the trust and its assets been recorded in trustees’ resolutions or minutes?

• Review Trust’s Financials
  • Consider the solvency of the trust.
  • Have all payments made on behalf of the trust since the last review been made from a separate account in the name of the trust. The financial activities of the trust must not be intermingled with your personal financial affairs.  They must be separate and distinct in order to maintain the integrity of the trust.
  • Review all the trust’s bank statements, investment reports, financial statements, tax returns, etc.
  • If the trust has received income, have financial statements been prepared and income tax returns filed?

• Consideration of Beneficiaries
  • Consider each beneficiary’s circumstances, needs and any disabilities.
  • Record any distributions made to beneficiaries since the last review, or to be made following the meeting.

Sound like a lot of work? Wakefields offers a Trust Administration Support service. If you would like to know more about this service, or have any questions about your family trust and how you administer it, give us a call on 04 970 3600.