I reviewed a couple of trust deeds today. Nothing unusual, it’s what I do. For the record when reviewing a deed of trust I start of with my trust review check list and I finish off with a summation of what I feel. While the check list elements are helpful in highlighting drafting errors and shaping my thoughts, trust review is as much art as science.
Neither deed was particularly good, equally neither was monstrously bad. The trust documents that accompanied one deed included an indemnity from the settlors to the independent trustee company. This trust was drafted somewhat narrowly so that the settlors were the sole beneficiaries together with a trust of which they were also the sole beneficiares. The settlors were also trustees. However, there was an independent trustee and the power of appointment and removal of beneficiaries was reserved to the trustees. Decisions had to be recorded in writing to be valid (not a drafting feature I favour as my view prefers the position that while a record of a resolution is important, the validity of the resolution should be based on how the decision was reached, not how it is recorded); and they had to be unanimous. So far so good. Back to that deed of indemnity. In addition to the settlors indemnifiying the independent trustee from any liability it incurred, howsoever incurred (a side of breach of trust with that sir?), this deed provided that the settlors had the sole responsibility to prepare and maintain trust accounts, manage the trust assets and account for trustee income tax liabilities.
Fair enough you think? This means the settlors don’t have to waste money discussing trust accounts and administration with the independent trustee, they can get on with managing the trust without interference.
Or can they? The first question that springs to mind is whether this is a permissible delegation of trustee powers. The second is how unanimity is to be exercised when only two trustees are in control of the trust. The serious question is, how robust is this trust looking now? The only thing that had saved it from my fluffy white dog stamp was the independent trustee and the robustness of the trustee powers. Now what we have is two settlors who are effectively the sole beneficiaries as well as being the sole trustees on duty. So is it a trust, or is it just something that looks like a trust?
And for the great big barking question, if you are going to go to the trouble and expense of settling a trust, why would you allow your independent trustee, the person who is to save you from yourselves and evidence that the trust is more than the sum of yourselves, to be absent without leave from the first day of trade?
If your independent trustee is not prepared to step up and do the job (or if you are not prepared to meet the cost of proper effective trust management) – the question for you as a settlor should be – what is in this for me? Are my intentions in safe hands or I am I just handing over money to someone who wants to clip the ticket, but is not in this with me as my trustee for the long haul.