How is a new Trustee added to a Family Trust?
In the current Patricia Holdings Family Trust deed, it is either the Trustee or the Appointor who has the authority to add a new Trustee. The appointment can be verbal or in writing (in writing is preferable). Generally the appointment is in the form of a Deed. The new Trustee must, when accepting the appointment, undertake to carry out the duties of Trustee and discharge the obligations contained in the Trust deed and at law.
How is a Trustee in a Family Trust changed?
The existing Trustee may resign or be removed. If by resignation it can be verbal or in writing (in writing is preferable).
If there is more than one Trustee, the notice, whether verbal or in writing, is given to the other Trustee or Trustees if there is more than one Trustee. If there is only one Trustee then the notice is given to the Nominated Beneficiaries.
A Trustee can be removed by the Appointor. Depending upon the wording of the Deed, either the retiring Trustee appoints a new Trustee or the Appointor appoints a new Trustee. The appointment should be in writing, preferably by Deed and should be signed by the new Trustee and incorporate an undertaking by the new Trustee to act as Trustee and discharge the duties of a Trustee set out in the Deed and at law.
Most Family Trust deeds provide that it is the Appointor that has the power to remove an existing Trustee and appoint a new Trustee.
The Patricia Holdings Family Trust deeds provide that the Appointor is the person who may remove a Trustee and appoint a new Trustee except in the following cases:
- if there is no Appointor then a Trustee (either the retiring Trustee or a continuing Trustee) has the power to appoint a new Trustee
- if the Trustee has died then the deceased Trustee's Executor (Legal Personal Representative) has the power to appoint
- if the Trustee or Legal Personal Representative fail or refuse to appoint then the Nominated Beneficiaries can appoint.
Who are to be the Beneficiaries?
The Beneficiaries or Beneficiary are the persons or person for whom the Trust is established. There are commonly two levels/types of Beneficiaries.
Nominated Beneficiaries are named and are intended to be the primary Beneficiaries of the trust. A Patricia Holdings deed allows for a broad pool of General Beneficiaries associated with the Nominated Beneficiaries to give the Trustee maximum flexibility. Our Trust deed allows for the following to be deemed General Beneficiaries:
Relations of the Nominated Beneficiaries which includes the parents, brothers, sisters, spouses, widows, widowers, children, children’s children, adopted children, and any lineal or lateral relation of the “Nominated Beneficiaries”, the spouses, widows, widowers, children and grandchildren of such brothers, sisters, spouses, children and descendants and next of kin. These include any person filling any of the above categories by reason of lineage, adoption or bona fide domestic relationship, including a bona fide relationship between persons of the same gender.” “Related Corporations and Trusts”, “Directors of Related Corporations”, “Shareholders of Related Corporations”, “Legal Personal Representative” of a General Beneficiary, and “Charities and Institutions”
The Trust deed also provides for Additional General Beneficiaries. These are Beneficiaries (persons or companies) who are not related to the Nominated Beneficiaries, so are not included in the pool of General Beneficiaries (as defined above). Persons or companies related to Additional General Beneficiaries are not included in the pool of General Beneficiaries.
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Who should be the Trustee?
The Trustee can be an individual or a company and is appointed by the Appointor when the Trust is first established. If the Trustee is an individual the Trustee should be a person in whom the Appointor and the Beneficiaries have total confidence. Commonly (and this is the Patricia Holdings recommendation) the Trustee is a company. If the Trustee is a company then the directors of the company should be individuals in whom the Beneficiaries have total confidence. There is a legal separation between individuals in their capacity as Directors of the company and their capacity as Beneficiaries of a Trust. It is very common for the Directors of the Trustee Company to be the same individuals as the Nominated Beneficiaries so in effect the Nominated Beneficiaries have effective control and management of the Trust.
What is a Family Trust?
Also commonly referred to as a “Discretionary Trust” a Family Trust formalises an arrangement where a Trustee is permitted to hold assets for a Beneficiary (or Beneficiaries) and to distribute income and capital between the Beneficiaries as and when the Trustee exercising discretion decides. The trust deed includes a wide pool of general Beneficiaries with lineal and lateral relations to the nominated Beneficiaries.
The person who sets up the Trust is called the Settlor. He or she is the person who contributes the original property or amount of money (called the settled sum) to enable the Trust to commence (see question “What is the amount of a settled sum?”).
