Trusts and Trustees
The majority of trusts are established with a trust deed or a will. Common examples are family trusts, business trusts and protective trusts.
Characteristics of a Trust governed by the Trust Act
- Any relationship between a trustee and a beneficiary where the trustee holds or deals with property for the benefit of the beneficiaries or for a permitted purpose.
- Where a trustee holds or deals with trust property in an identifiably separate way to their own property.
- Where a trustee has a duty to hold or deal with trust property in accordance with the terms of the trust and their legal obligations.
- Where a trustee is accountable for carrying out the duties set out in a trust.
Trustees Mandatory Duties
- Know the terms of the trust deed
- Act in accordance with the terms of the trust
- Act honestly and in good faith
- Hold trust property
- Act for the benefit of the beneficiaries or the permitted purpose
- Exercise trustee powers for a proper purpose
Disclosure of trust information includes the trust deed, documents relating to the assets and liabilities of the trust, the administration of the trust, the financial accounts of the trust and other information necessary to allow beneficiaries to review the stewardship by the trustees and to hold trustees personally accountable.
The process requires trustees to notify all people who are qualifying beneficiaries. If requested, a trustee must provide trust information to a beneficiary within a reasonable time. Trustees can only withhold information in certain circumstances.
A qualifying beneficiary is a person who the settlor intends to have a realistic possibility of receiving trust property. While trustees have some discretion, the Trust Act favours keeping beneficiaries informed.
Trustee’s Risk and Liability
Trustees are obligated to comply with the terms of the Trust Deed and the legislation. It doesn’t matter if a loss arose or not as a result of a fault by the trustee. What matters is whether the trustee was doing something that the trustee was not permitted to do. Where a trustee acts in accordance with the trust deed, but does so badly (e.g. mismanagement) proof of fault then becomes relevant.
Breach of Trust
The three main avenues for compensation for the breach of Trust are account of profits, equitable compensation and interest.Back