Trustee Forward planning

Published June 16, 2016

A professional trustee was recently recounting the challenges they faced following the death of a co-trustee.

The co-trustee who died was the Settlor of the trust and one of the discretionary beneficiaries (with the children). The final beneficiaries were the children in unequal shares.

The trust’s only asset was a home over which a small mortgage was secured. The trustees didn’t open a bank account as the co-trustee had lived in the home and paid all the outgoings.

Following the co-trustee’s death, the professional trustee was faced with making some important decisions on their own. Those decisions included:

  • How to fund the payment of outgoings, the mortgage and property maintenance
  • Whether to retain the home, or sell it to repay the mortgage
  • How best to balance beneficiary interests when the Settlor had expressed clear wishes to favour one child
  • Whether to continue with the trust or bring the date of distribution forward

In looking to the Settlor’s letters of wishes for guidance, the professional trustee found that the wishes recorded were vague and ambiguous.

The Settlor’s wishes included a request to keep the trust running during the lifetimes of both the Settlor and the children. While one child was to be favoured, it wasn’t clear to what extent.

The children who were to receive a lesser share had been asking when they could expect a distribution.

The professional trustee was feeling the pressure.  The problems being faced had been clearly signalled when the trust was established 10 years earlier.

It was never a matter if, it was always a matter of when.

In hindsight, more could have been done to be better prepared.  It was a timely reminder of the importance of forward planning and having up to date Settlor wishes.

What questions should you be asking your co-trustees before it’s too late?

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