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The Professional Trustee Team

What is a Professional Trustee? Do I Really Need One?


Many people ask me what is a professional trustee is, what they do, and what value they can bring to a trust. Often, these people are considering how they want to structure their asset holdings and what sort of return they want to make from them.

The simple answer is that a professional trustee who does their job keeps you out of trouble and, usually, out of expensive trouble that you wouldn't have seen coming.

We're like the Family Trust Police.

What is a professional trustee?

A professional trustee is a person (or a company) who acts as a trustee of a trust. That person (or company) has no interest in the assets of the trust – that is, they are not a beneficiary of the trust and are not entitled to share in the assets of the trust.

What does a professional trustee do?

Generally speaking, a professional trustee's function is to work with the other trustees of the trust in looking after the beneficiaries and the trust assets, and in administering the trust. The difference is that a professional trustee is trained to understand what has to be done when running a trust.

Some of the functions professional trustees carry out are:

• Arranging meetings with the other trustees to discuss transactions the trust is going to undertake, such as buying property, purchasing shares, obtaining loans, etc.

• Making unanimous decisions with the other trustees

• Considering the existing investment policies of the trust and discussing with the other trustees whether these policies should be changed

• Signing appropriate documents with the other trustees such as agreements for sale and purchase and loan documents

• Ensuring all the decisions the trustees make and the affairs of the trust are correctly recorded in minutes and in deeds

• Checking gifting is completed

• Other miscellaneous matters such as checking insurance policies are up to date

Ultimately, a professional trustee's role is to check that the interests of the beneficiaries are considered, the assets of the trust are protected for those beneficiaries, and the trust is running correctly.

Why should you have a professional trustee?

It is important to remember that trusts are set up for a variety of reasons, such as protection against means testing (e.g. aged care fees), a defence mechanism from property relationship claims, and for asset protection.

However, a trust will only protect assets if the trustees carry out their functions correctly. This includes administering a trust properly. If trustees don't meet their duties, allegations can be made that the trust is a sham and if those allegations are substantiated, asset protection can be lost. Ultimately, this can result in the trust assets being made available to satisfy claims, for example claims by creditors.

As noted above, professional trustees assist other trustees by ensuring all of them meet their legal duties and responsibilities. For instance, a professional trustee can make certain the trustees meet regularly and record all the transactions the trust undertakes.

Additionally, the presence of a professional trustee who does their job right can demonstrate that the trust is real. Assuming the professional trustee carries out their functions properly, the chances of a successful allegation of sham trust should be minimised.

Professional trustee fees

Professional trustees usually charge fees on the basis of holding the position of trustee. It is a small amount of money for the security received. For more information on our professional trustee fees, please contact us.

Professional trustees will take out insurance policies in respect of their functions and there is a cost to this. Also, professional trustees may charge for the work they do on behalf of their co-trustees and on behalf of the trust.

For example, a professional trustee can charge a fee for preparing minutes and executing documents.

Recently, in a couple of cases, the courts favoured the appointment of professional trustees. These cases showed that having a professional trustee gave credence to the existence of the trusts and the transactions undertaken by the trusts. So, despite the fees that may be charged, serious consideration should be given to appointing a professional trustee.

Summary

Having a professional trustee is not legally necessary, but it can be an enormous advantage. Professional trustees are usually well acquainted with trustee duties and what action has to be taken to satisfy those legal responsibilities.

By a professional trustee assisting in all trustees meeting their obligations, such as having meetings, making decisions, looking after trust assets and correctly documenting and administering trust affairs, the chances of successful allegations of sham trust are decreased.

Whilst a mechanic isn't legally required to carry out all car repairs, most people want to ensure their car is safe and so usually have a mechanic do repairs. Not using a mechanic might save a few dollars but ultimately, could result in some nasty consequences. Having a professional trustee who carries out their functions is much the same – the benefits can far out weight any costs involved.

Individual trustees are often busy people, leaving little time to administer the trust under their control. Additionally, just like many of us don't know how a car engine works and wouldn't know how to carry out car repairs, many people don't know how to meet their trustee duties and how to administer a trust.

Remember, trustees are personally liable to all the beneficiaries of a trust and unfortunately, ignorance of their duties is no excuse in the eyes of the law.

Thus, DIY trust administration practice is not dissimilar to undertaking car repairs – savings on professional trustee fees may seem a great idea initially but those savings can be outweighed by the costs faced when a trust structure fails through DIY practice. Cheap can be expensive in the long run.

We have now just completed the end of the financial year and this is an ideal time for trustees to ensure trust administration has been done correctly.

It is also a good time to consider whether appointing a professional trustee is warranted.

Check out the Family Trust page as well as the Professional Trustee section of this website for more information. Or if you have a question or would like to speak us, please contact us now.  We're here to help.

Professional Trustee Services
Gilligan Rowe + Associates Ltd
Chartered Accountants
Email: [email protected]
Ph: +64 9 522 7955

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The Professional Trustee Team
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The Professional Trustee Team
© Gilligan Rowe & Associates LP

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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
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