There are many duties that a trustee must adhere to that you may not be aware of. So we’ve put together a list of some of these important roles and documentation they are responsible for:
Trust details: There must be a document containing the relevant details of the trust, including: the date of settlement; the identity of the settlor and trustees; the names, addresses and dates of birth of the beneficiaries; records of the births, deaths, marriages and divorces of beneficiaries; and any indemnities and guarantees.
Documenting meetings: If the trust will be actively trading or acquiring assets, then the trustees will probably meet on a regular basis. But if the trust is intended simply to acquire and hold assets, then the need for trustee meetings is less. However, all meetings should be recorded in the minute book, along with all decisions made.
Correspondence: You must maintain a file or diary of correspondence, including copies of contracts with third parties.
Record keeping: Ensure you keep capital and income accounts, along with up to date cash books.
Trust property: Keep a list of all trust properties, including where the documents of title are kept.
Financial accounts: You must ensure proper and professional accounts are prepared each year by the trust’s accountant. Even if the trust is simply a passive investor or holder of property, it is desirable that proper books of account be prepared, especially if the trust has a bank account.
Tax returns: Trustees are required to annually file separate income tax returns for the trust.
Other files and records the trustees should maintain are:
Investment of trust assets: Trustees should develop, maintain and review an appropriate investment strategy for the trust. They should keep accurate and thorough records about the strategy they have adopted. The level of care required of trustees is stated in Part 2 of the TRUSTEE ACT 1956 (as amended by the TRUSTEE AMENDMENT ACT 1988). This requires that they exercise the care and skill that a “prudent” businessperson would exercise in managing other people’s affairs. Professional trustees and trustees who invest money for others as a profession are required to exercise the special care and skill that someone in their profession would exercise. A trustee will not be liable for any losses suffered by the trust if he or she acts prudently and considers the interests of all beneficiaries (discretionary or otherwise).
Changes in trustees: When the trustees change (for example, one retires and another is appointed), it is important that the change is formally documented and that the trust’s lawyer is notified. If not, the incorrect trustee names may be recorded on documents of title to new assets that are acquired, and this will mean that when the asset comes to be sold there will need to be an extra round of legal documentation before the sale can be completed.
Information for beneficiaries: Trustees should provide the beneficiaries with any information that they request about the operation of the trust and its assets.
It’s very important you do not mix trust and personal property. If this happens, the onus is on the trustee to distinguish the separate assets, and to the extent that the trustee fails to do this those assets belong to the trust. To ensure that assets aren’t mixed, the purchase price for all assets bought by the trust should be paid for out of the trust’s bank account. Similarly, the sale price for all assets sold by the trust, and all income belonging to the trust, should be paid into the trust’s account.
Decision making by trustees:
Before making decisions the trustees should acquaint themselves fully with all the relevant facts, and consider whether they need expert advice from lawyers, accountants, investment advisers or other specialists.
After considering any expert advice they think is necessary, the trustees must ensure that they turn their own minds to the question in hand, acting honestly and in good faith. The decision must be theirs, and not that of their expert advisers, as trustees are not permitted to delegate their decision-making power, except when this is authorised by the trust deed. In general, trustees should not commit themselves in advance as to how they will exercise a discretion in the future.
Trustees can apply to the courts for directions concerning any of the trust property, or the management or administration of the trust property, or the exercise of any power or discretion vested in them. In this way, trustees who are in doubt about the legality of an intended course of action can get the court’s approval and be protected from any liability for the action.
Trustee decisions must be unanimous unless the trust deed allows for majority decisions. The trustees should record all their decisions and should also record the reasons for their decisions, and attach all the relevant documents including any expert advice given.