The death of a loved one is a difficult and emotional time for a family. Now, imagine that the person who has passed away was the sole manager of all of the family’s financial affairs, leaving behind substantial assets and wealth and that they have appointed you as the executor of their will and the trustee of your family’s various trusts.
Are you ready to take on this role? Do you have the adequate knowledge and have you had adequate time to grieve for your loved one?
Carrying out the role of an executor or trustee can be extremely daunting for an untrained person. First and foremost, all decisions regarding the trust must be made in the best interest of the beneficiaries. How do you know if you are fulfilling that duty? Every decision you make will have an impact on the beneficiary’s inheritance.
As a result, we are seeing more and more families choosing not to appoint a family member or close friend to be their executor and trustee. Rather, they are choosing a professional trustee company to act either solely or jointly with a family member. Why?
1. Leave it to the experts
Being an executor and trustee brings with it significant responsibilities and duties. How many of the following trustee duties would you be comfortable in carrying out?
- Understanding the detailed terms of a will and/or trust deed;
- Adhering to and carrying out the terms of the trust;
- Not delegating the trustee’s duties or powers;
- Paying and transferring the trust property and the income to the correct beneficiaries;
- Duty to not act gratuitously;
- Not mixing assets; or
- Investing the trust funds for the benefit of the beneficiaries.
Professional trustees are regulated and are experts at what they do. They will have a specialist team with many years of experience in dealing with estates and trusts.
2. Accessing the best advisors
With access to expert advice from tax, legal and finance experts, professional trustees are well placed to fulfil all the duties and responsibilities required. They can assist beneficiaries in a wide range of ways, including:
- provision of regular payments from the trust to assist with meeting bills or living expenses, educational or medical costs;
- collection of income from trust investments such as interest, dividends or rent;
- making sure trust property is protected and insured;
- making sure the trust structure effectively minimises tax leakages and ensures that assets are protected from third party claimants;
- providing wealth management and investment advice to ensure funds within the trust are invested responsibly in line with the objectives of the beneficiaries and future generations; and
- ensuring taxation and accounting compliance obligations are met,
3. Independence and objectivity
Administering an estate and dividing assets between family members can be an emotionally charged process. Where a family member is also the executor and/or trustee, the process can become a lightning rod for family disputes. Professional Trustees have a duty to act in the best interest of the beneficiaries and are generally one step removed from the emotion of family dynamics. This can help to remove some of the emotional stress and strain that a family member or friend could be subjected to when serving as an executor or trustee. They will not be biased by a beneficiary’s past choices or present lifestyle and will simply administer the estate and trust objectively in line with the terms of your Last Will and Testament.
4. Continuity across generations
A professional trustee can be appointed to administer trusts and estates indefinitely, unlike an individual trustee whose natural life is finite. Even private corporate trustees with individual family members as directors need a succession plan to ensure that as individuals pass away, the director roles remain consistent with the original plan. The appointment of a professional trustee can help to ensure a seamless transition of family wealth across generations.
5. High standard of care
Professional Trustees will be required to be licensed and insured and are subject to strict state and federal regulations. This, in turn, means that they will be held to a very high standard of care, above and beyond what a family member might be.
How we can assist
Mutual Trust is a licensed trustee under the firm’s Australian Financial Services License 234590 and has over 60 years’ experience in acting as Trustee for many of our clients. We are one of only a handful of firms in Australia that can provide this service. Increasingly, our clients are appointing Mutual Trust as the executors of their wills and the trustees of their trusts to relieve their family members of the legal and administrative burden that comes with transitioning wealth.
Mutual Trust Pty Ltd ACN 004 285 330 (AFSL 234590). Liability limited by a scheme approved under Professional Standards Legislation. For participating members (other than for the acts or omissions of Australian Financial Services Licensees). This information is general in nature and subject to change. It does not constitute tax, legal or financialadvice. We recommend you seek advice specific to your circumstances before taking any action. Copyright © 2014 Mutual Trust Pty Ltd.