Oct 19

Trustees of a Family Trust

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The position of a Trustee is an important position. The Trustee’s duties are covered between legislation in each state, commonwealth legislation and case law. Trustees can be individuals, one or more than one and also companies.

Trustee’s Duties

Trustees of family trusts have many duties. Many of these have been formulated by Judges through case law over the ages. Broadly speaking, the Trustees:

  • Must act in good faith
  • Must act personally
  • Must act unanimously where multiple Trustees are involved
  • Must not be dictated to by others (ie beneficiaries)
  • Have a duty to consider how distributions should be made and to whom
  • Have a duty to avoid fettering of discretion.

The Trustee also has fiduciary duties which exist alongside the various statutory obligations imposed on Trustees.

Let’s have a look at some of these duties more closely .

Duty to act personally.

This duty cannot be delegated unless permitted by the trust instrument (deed), statute or court order. The office of Trustee is viewed by the courts as one of trust and personal confidence. A common mistake is for a Trustee to execute a power of attorney to a third party (the attorney) granting the attorney general or wide ranging powers relating to the authority of the Trustee. More often than not these powers of attorney, if granted outside the scope permissible by law, will not be enforceable and can have severe consequences if acted upon.

In Victoria, under the Powers of Attorney Act 2014, a delegation of the Trustee’s powers under a general power of attorney is not permitted under section 7(2)(b). The same applies for enduring powers of attorney.

Whilst, as a general rule, the law of equity prohibits a Trustee from delegating its duties, a Trustee may appoint agents to help administer the trust.
State legislation also covers the conditions of the appointment of agents to the trust.

Duty to Act Unanimously

What happens when there is more than one Trustee – can one Trustee not consider a matter and leave it to the other Trustees to decide upon?

In essence where multiple Trustees are involved, any decision by them must be joint and unanimous.

Please note , a statutory exception exists for trustees of Self-Managed Superannuation Funds .