Trustee forward planning
A professional trustee recently explained the challenges following the death of a co-trustee.
The co-trustee was also the trust creator of the trust and a discretionary beneficiary (with the children). The final beneficiaries were the children in unequal shares.
The trust’s only asset was a home over which a small mortgage was secured. The trustees didn’t open a bank account as the co-trustee had lived in the home and paid all the outgoings.
Following the co-trustee’s death, the professional trustee was faced with making some important decisions on their own. The decisions included:
How to fund the payment of outgoings, the mortgage and property maintenance
Whether to retain the home, or sell it to repay the mortgage
How best to best explain and balance beneficiary interests when the trust creator had expressed clear wishes to favour one child
Whether to continue with the trust or bring the distribution forward
In looking to the trust creator wishes for guidance, the professional trustee found that the wishes were vague and ambiguous.
The trust creator’s wishes included a request to keep the trust running during the lifetimes of the trust creator and the surviving children. While one child was to be favoured, it wasn’t clear to what extent.
The children who were to receive a lesser share had no idea they could be receiving a lesser share.
The professional trustee was under the pump and feeling the pressure.
The problems being faced had been signaled 10 years earlier when the trust was set up. In hindsight, more could have been done to be better prepared. The questions just hadn’t been asked.
This was a timely reminder of the importance of forward planning, reviewing the practical application of plans and crucial conversations with the trust creator.
What questions should you be asking of your trust creator/co-trustees before it’s too late?
Trust good practice.
Lindsay