Trustee succession as part of the estate plan

You are currently viewing Trustee succession as part of the estate plan

Why do you need to deal with your trust assets (as well as your self-managed super and companies) as part of a comprehensive estate plan?

It’s obvious, isn’t it? After all, these assets form a huge part of your notional estate.

But there’s more to it than that, and it comes down to control.

The Role of your Legal Personal Representative

Trust deeds need to deal with the possibility that trustees and appointors may pass away (or a director in the case of a corporate trustee) while still in office.

When it comes to dealing with a sole trustee that passes away, by far the most common solution adopted by deeds, constitutions and legislation is to vest the powers of appointment (if not the actual trustee’s powers) in the deceased trustee/appointor’s legal personal representative (LPR). Where there is a valid will, the LPR will be the executor under the will.

Is your executor the right person to be running your trust?

Consider a deceased husband and father who wanted his spouse to be executrix of his estate, but expected his daughter to run the family business which is operated out of a trust. The deceased was also appointor of the trust.

Unfortunately, he didn’t take the time to read the trust deed before making his will. If he had he would have seen that the deed nominated his LPR as successor appointor if he passed away. By failing to prepare documentation providing for a different line of appointor succession, and instead relying on the default mechanisms in his trust deed, he has ensured that his wife, as his LPR, will become the next appointor. And for reasons we have discussed previously, the appointor has effective control over the trust.

This situation is easily recoverable if the wife is happy to step aside and allow the daughter to run the trust. But if ownership of the business and trust assets are contested, the will maker has inadvertently given control of the trust to his wife and not his daughter.

Choosing your executor

Choosing your executor is a multi-dimensional issue. Often, we focus on the question of whether a person is honest and reliable. These are important considerations.

But you should also keep in mind the likelihood that your ‘off the shelf’ trust and company documents will use your LPR as a solution to trustee/appointor/director mortality.

Where you don’t want your executor to control a particular entity, you must make separate provision to ensure that the lines of succession run as you want them to. The correct approach will be set out in your trust deed, but will generally require either specific provision in your will or a deed of appointment.

Aintree Group Legal will be happy to discuss your estate planning needs. Contact us today.