Who Should be Appointer of a Trust??

[NormH]

We have several trusts and alternate between our fathers as settlors , so we have trusts that can distribute to either side of the family.

Having seen the comments from Nigel in previous posts , with our latest fund , my father wrote a cheque for ten dollars , which we then photocopied along with the deposit slip and have these in with the trust deed.

See Change

Ohh See Change, hi again, I am not sure about the "cheque" bit either, now Dale and a heap of others know more about this than me but my understanding is the "trust" must be clearly identifiable, what happens if your father closes the bank account or there is at some stage no monies in the account, even for a day, then it could be argued that the money has gone and the trust relationship/agreement no longer valid. Also I suspect that cheques have a "use by date" which is likely to be less than 80 years - 1 day that your trust can live for.

The advise I was given it is better to get the "money held in trust" ($10) and glue/staple it to the trust deed so that it is clearly and easily identifiable.

I am not sure I would risk the "trust being wound up early/unexpectedly" due to some quirk with a bank or laws relating to cheques.


Norman

 

[see_change]

Myself or my wife are the appointors of the trust, so control who is the trustee . The trustees are companies of which one of us is the sole director so our fathers are not in a position to close the account.

They are the settlors who give money to be held in trust. That money is then deposited in an account in the name of the company as trustee of the relevant trust.

See Change

 

[GreatPig]

In relation to legal problems with trusts, this article about trusts in NZ may be of interest.

http://www.stuff.co.nz/stuff/print/0,1478,3118192a6445,00.html

GP

 

[Jas]

Spann had an interesting opinion about the appointer of the trust. He said that if you are the appointer of the trust and go bankrupt, the public trustee has taken people to court.

They are supposed to be acting in your future best interests. As such they take over your financail duties (part of which is the appointer). Having got hold of hte appointership, the take over the trustee and then distbute the assets of the trust.

He suggests you use a lawyer or accountant as appoitner, and have a signed letter of resgination from them as part of you agreement.

Jas

 

[see_change]

Given that , every so often , we hear of solicitors or accountants being barred / found guilty of misappropriating their clients funds etc , I'll take my chances on that one Jas . I think that is a much more realistic risk , in particular at the time of a death etc.

I seem to recall shortly after one high profile Australian died , his potential benifactors were unable to trace sums of money that were meant to be in a trust fund controlled by one of his associates .....

See Change

 

[NormH]

Spann had an interesting opinion about the appointer of the trust. He said that if you are the appointer of the trust and go bankrupt, the public trustee has taken people to court.

They are supposed to be acting in your future best interests. As such they take over your financail duties (part of which is the appointer). Having got hold of hte appointership, the take over the trustee and then distbute the assets of the trust.

He suggests you use a lawyer or accountant as appoitner, and have a signed letter of resgination from them as part of you agreement.

Jas

Jas hi,
that is an interesting thought and I would be interested in hearing/having further discussion on this one. My thoughts are however if you were to go bankrupt then couldn't you sign over your status of "appointer" to someone else? or a company that you are the sole director?.

I don't know if this would be caught up and clawed back under the "transfer of assets" provisions. I would think not as you are only the appointer of the trust, you don't own the assets of the trust. Admittedly that power really does give you "ultimate ownership" but only by the way of who you "make the trustee" and their decisions then could be to your benefit. All of this is assuming of course that the "public trustee" in those circumstances does take on the roll of appointer. I am not even sure of that point as "appointer" is a roll/function and not an asset.

Norman

 

[see_change]

All the appointer does is appoint the trustee. The Trustee doesn't actually run the trust so I don' t see why it is relevant , though would be interested to here what Nick, Dale and Nigel have to say about Peter Spann's comment.


(Edit -- I meant to say the Appointor doesn't actually run the trust ... thanks for pointing out my miskate Jas... ... ahhhhh!!!!!! .. I'm not even going to bother correcting that one )

See Change

 

[austini]

Hi gang,

Certainly any comments from Dale, Nick or Nigel will be welcomed.

There is not a week goes by where there is yet some new negative comment or potential weakness being stated about trusts in various circles or media. And quite often the way these comments are phrased and or examples given seem to automatically imply that what is being said is actual reality.

However is most of this just theoretical opinions? Are there any cases to actually support these people's views?

And if trusts are supposeably so fragile and prone to attack why do many in the legal profession use them personally!

As Dale's literature points out trusts have been around since the crusades and apart from tax changes etc the asset protection seems to have survived pretty well.

Despite all the negatives I hear or read the asset protection and flexibility to arrange one's financial affairs is highly likely to always be superior to holding assets in your own name.

Cheers - Gordon

 

[Jas]

All the appointer does is appoint the trustee. The Trustee doesn't actually run the trust so I don' t see why it is relevant ...

See Change

Um SC,

The trustee does run the trust.

Jas

 

[Jas]

Norman,

There's not really a lot more I can add to the discussion. Spann mentioned that the public trustee had recently won a court battle and done just that.

Spann implied that you can resign from the 'appionter' postition - his suggestion that you have a letter of resignation from your accountant says they can resign from the postition.

He did make a few comments about trusts that I disgree with, so I too would like to see one of the SS accountants to comment on this.

I haven't seen NickM posting much recently, is he still around?

Jas

 

[NormH]

Norman,

There's not really a lot more I can add to the discussion. Spann mentioned that the public trustee had recently won a court battle and done just that.

Spann implied that you can resign from the 'appionter' postition - his suggestion that you have a letter of resignation from your accountant says they can resign from the postition.

He did make a few comments about trusts that I disgree with, so I too would like to see one of the SS accountants to comment on this.

I haven't seen NickM posting much recently, is he still around?

Jas

Jaz hi,
sorry I guess I was aiming the Q generally at others and as you have said NickM or DaleGG maybe as I still only see the appointer as a function and not an asset per se so don't understand how anyone could, also with that belief then I don't see any claw back rules affecting any decision the appointer may make to transfer that status.

Anyway thanks for a bit more of a background, I'll see if I can find the decision spann is talking about on austlii website.

Norman

 

[see_change]

Um SC,

The trustee does run the trust.

Jas

oops, meant to say the appointer doesn't run the trust... tired ... eyes closing ... zzzz.

See Change

 

[NigelW]

Spann had an interesting opinion about the appointer of the trust. He said that if you are the appointer of the trust and go bankrupt, the public trustee has taken people to court.

They are supposed to be acting in your future best interests. As such they take over your financail duties (part of which is the appointer). Having got hold of hte appointership, the take over the trustee and then distbute the assets of the trust.

He suggests you use a lawyer or accountant as appoitner, and have a signed letter of resgination from them as part of you agreement.

Jas

Hi Jas

With the greatest respect to Peter, the case law (as far as I'm aware) says that the right of appointment under a trust is NOT part of the bankrupt's estate. Thus it is not available to vest in the bankruptcy trustee. So you can't lose control of your trust to the bankruptcy trustee.

Perhaps Peter could elaborate on the case he's been told about?

I'll do some digging too.

Cheers
N.

 

[Mry]

I always recommend a close personal friend to be the appointor. Not you, not your spouse and certainly not your professional advisor. Someone you can really trust. It really is the most powerful position in a trust.

In a family situation, the appointor is usually left to one of the spouses. But if you go to family court in the event of a divorce and one of the parties is an appointor, the judge can instruct the appointor in how to operate and forbid trustee changes until after the asset reallocation. If the appointor is a close personal friend of yours, they can simply change the trustee to someone else and those instructions from the family court will have no binding effect.

I also don't recommend that a professional become the settlor as it could be questioned whether it was a proper trust establishment or just a commercial arrangement but most families don't know what a settlor is so it usually ends up being them just out of pragmatism and/or laziness.

 

[NigelW]

I always recommend a close personal friend to be the appointor. Not you, not your spouse and certainly not your professional advisor. Someone you can really trust. It really is the most powerful position in a trust.

In a family situation, the appointor is usually left to one of the spouses. But if you go to family court in the event of a divorce and one of the parties is an appointor, the judge can instruct the appointor in how to operate and forbid trustee changes until after the asset reallocation. If the appointor is a close personal friend of yours, they can simply change the trustee to someone else and those instructions from the family court will have no binding effect.

I also don't recommend that a professional become the settlor as it could be questioned whether it was a proper trust establishment or just a commercial arrangement but most families don't know what a settlor is so it usually ends up being just out of pragmatism.

Hi Myr

With respect, I don't agree that having a friend as appointer is any better as an option. You're correct that Family Court will look at control of financial resources in determining the carve up of assets. However, in my view there's at least as much chance of a falling out with your close friend as with your spouse (surely your spouse should be your best friend too - but I digress). As you rightly point out, it's the most powerful seat at the table, so why would you give it up??? Particularly where it's not property which can be snaffled by your Bankruptcy trustee

Also, the Family court has the power to make orders which impact third parties to the marriage (no ribald jests please GeoffW ). That could include trusts despite the change of trustee. One suggestion I've seen similar to your proposal is that the "financially savvy" spouse have his or her parents as the appointers but I'm not convinced that a Family Court would not regard the trust as under the defacto control of the spouse in that scenario in any event. It also becomes a practical problem if parents become too old/infirm/incapable or die (as they're certain to do over the 80 year lifespan of the trust).

I agree with you on settlor not being the accountant or lawyer if it can at all be helped.

Control is the key in all asset structures. You've just got to live with the notion that your ex-spouse will get what they get unless you go with a binding financial agreement under Family Law Act (or hide your assets and perjure yourself in Family Ct - not an option obviously ).

Cheers
N.