Importance Of An Independent Trustee.

Independent Trustees Are Not Legally Required.

An independent trustee is an impartial trustee who does not benefit from the trust’s assets. It can be either a family friend, or a person from professional field, such as an accountant or a lawyer.

An independent trustee is more likely to be fair and equitable in making any decisions for the trust. Unlike trustees who have an interest in the trust. This is due to lack of personal gain or personal benefit from such a decision.

Benefits Of Having An Independent Trustee.

The benefits of having an independent trustee include, but are not limited to, the following:

Transparency

Having an extra trustee overseeing the administration of the trust may prevent trustees with vested interest in the trust to continue to treat the trust assets as their own personal assets. It is crucial to ensure that the trust assets are being managed as such. Not as personal assets, to mitigate any “sham trust” arguments. Having an independent trustee means that if the Trust is ever challenged, you will be better able to show that the Trust was operating as a trust. As opposed to you treating the assets of the Trust as if they were your personal assets;

Efficient management of the Trust

Certain duties are imposed upon trustees by law to manage and administer the trust efficiently. These are in accordance with the terms of the trust deed, and for the benefit of the beneficiaries. Including proper record keeping, trustee decisions, written contracts, accounting records and financial statements, trustee change documents etc. Beneficiaries of the trust must be aware of their entitlement and have details of the trustees of the trust;

Impartiality

In certain situations the trustees that are closely involved with the trust have an emotional connection to the asset held in the trust. For example, a trustee decision to invest the trust assets in a business of their personal interest, rather than in a profitable business to generate income for all of the beneficiaries. This personal connection may sometime cloud judgment of the trustee with vested interest in the trust and make decisions that are not for the benefit of all of the beneficiaries of the trust. On the other hand, an independent trustee does not have such an emotional investment in the trust asset and can guide other trustees to consider the needs of all of the trust beneficiaries.

Protecting Your Trust And Beneficiaries.

Considering all of the above, it is important to appoint an independent trustee. One that you can trust and rely on to act in the best interest of your trust and the beneficiaries. Who knows the obligations of a trustee imposed on him or herself. Most importantly, be mindful of recent legislation and requirements for the trusts. All of the above will ensure that your trust structure is robust and well-managed in the protection of assets placed in your trust.

If you feel you could use some specialist advice, don’t hesitate to contact the Trusts & Wealth Protection Team.