What do I need to know when choosing trustees?

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Martin What do I need to know when choosing trustees_082019 moneyweb

What do I need to know when choosing trustees?

By  Martin de Kock - Ascor® Independent Wealth Managers

It’s advisable that your will be drafted in conjunction with your financial plan and that you appoint a trustee(s) carefully. It is a position that carries significant responsibility and should not be taken lightly. Be sure to choose wisely. Look at personality characteristics and also whether the person is in a position to manage such a tremendous responsibility to oversee your estate on your behalf.

Before considering the appointment of trustees, it is important to understand what a trust is. A trust comes into being when a donor or settlor donates assets or cash to the trustees of a trust to be administered by the trustees on behalf of, and for the benefit of, the trust’s beneficiaries. The rules in terms of which the trust is administered are contained in the trust deed.

The appointment as a trustee is a position that carries significant responsibility and should not be taken lightly. The trustee acts in a fiduciary capacity, which means the trustee should always act with great care when exercising his/her duties. The beneficiaries of a trust can sue the trustees if they feel that the trustees have not acted in their best interest.

It is important that trustees familiarise themselves with the Trust Property Control Act No 57 of 1988 as well as the trust deed governing the administration of the trust. This serves as a good starting point.

Be wary of accepting an appointment as trustee of a trust if you are not prepared to take co-responsibility together with the other trustees for managing the trust.

It is advisable that an independent trustee is also appointed as trustee of a trust. This gives more credibility to the trust assets not being a mere extension of the donor’s assets and his/her estate.

Trustees can be individuals or corporate trustees. Corporate trustees are companies or departments of financial institutions that act as trustees of trusts. Individuals representing these corporate trustees will act as trustees.

Ask yourself the following questions when you are looking to appoint someone as a trustee:

  • Are they available and accessible when needed to make decisions?

  • Are they reliable and have they proven to be?

  • Do they demonstrate an ability to manage their own financial affairs well?

  • Do they know the beneficiaries?

  • Are they young enough to act as trustees for an extended period?

  • Do they have the requisite skills to manage the affairs of the trust?

  • Are they open to utilising professionals should the need arise?

The most important question is probably – will they accept appointment as trustees?

Then have a look at the personal characteristics that a good trustee should have. These should include the following:

  • Be honest and trustworthy;

  • Be fair and objective;

  • Be prepared to be held accountable if mistakes are made;

  • For practical purposes, be close enough to be accessible;

  • Possess wisdom; and

  • Be likely to outlive the donor and should therefore not be too old.

If a professionally qualified individual accepts appointment as a trustee, e.g. an attorney, chartered accountant etc., it is likely they will charge a fee to act as trustee. Make sure you have agreed on an acceptable annual fee prior to making the appointment.

There is no prohibition on the appointment of the donor or any of the beneficiaries as trustees, but in this case, it is advisable that you co-appoint an independent trustee.

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Read more about Ascor® Estate Planning Services

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https://ascor.co.za/death-and-taxes-make-both-more-palatable-with-an-estate-plan/

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