A trust involves the establishment of a legal relationship whereby a trust deed is created under the control of a Trustee for a stated purpose. Most trusts are created by a will or by an individual (the settlor) transferring assets to a Trustee. The Trustee has a duty and responsibility to manage the assets of the trust in accordance with the terms of the trust deed and is accountable to the beneficiaries and to the courts for the execution of those duties.
The services of Trustee Companies can protect individual’s interests in various ways, including:
Personal and Family Trusts
The principle reason for creating a trust is the protection of assets and estates, and for financial planning and tax management.
The need for asset protection is now stronger than it ever was, the reason for this being the changing environment. Family relationships and partnerships that were unusual only two or three decades ago are now commonplace. There is no simple solution to dealing with relationships that are now comparatively complicated, and many wish to ensure their children and grandchildren receive their inheritance and use it wisely.
A family trust provides the greatest protection to hold assets for beneficiaries to pass either by will or by gift. The important outcome is that the assets pass to the spouse, children and grandchildren – not to others, except on terms chosen by the person creating the trust.
Wills and Estates
A will is a very important document that allows people to control how their assets (or ‘estate’) are to be distributed after death. If a person dies without having made a will, the estate may become more expensive to administer. Loved ones could lose their inheritance and face a lengthy court application to appoint someone to take care of the estate.
It is also important to keep a will up-to-date.
When a will is made, an Executor needs to be appointed to attend to the will’s initial administration, which includes arranging the funeral, paying debts and taking care of other legal responsibilities such as obtaining probate and preparing Certificates of Administration.
It is important to choose a professional when writing or updating a will thus ensuring one’s wishes are carried out. The Executor needs to be a trusted person. By appointing a Trustee Ccompany to write a will and to act as Executor, people can be confident their wishes will be carried out by professionals with all the necessary legal and financial experience.
Wealth Management and Protection is an advanced type of service that provides families and individuals with a ‘package’ approach to asset, trust, investment and portfolio management, estate planning, legal resources and taxation advice.
Under what is called an Agency Agreement, people are able to appoint a Trustee Company to act on their behalf and manage their affairs if they are unable to do so themselves for whatever reason.
An alternative and very effective tool for continuing asset management is called ‘Under an Enduring Power of Attorney’. By executing this document, people can appoint a Trustee Company to act on their behalf as a Property Attorney, thus ensuring continuity of effective management of affairs should they be unable to manage these themselves.
Trustee Companies are ideally suited to taking up appointments as both agents and attorneys for two key reasons. The first is their independent status which ensures that all decisions regarding the management of the person’s affairs are made solely in that person’s best interests.
The second reason is that Trustee Companies have all the resources and structures in place to undertake such appointments efficiently and effectively over the short and long term. Trustee companies employ teams of legal and tax specialists, investment advisers and professional client managers to ensure the best skills and systems are available at all times to manage client affairs.
Appointing a Trustee Company as an agent or attorney can avoid the real dangers of disputes and prejudice when involving family and friends in the management of one’s affairs. Conversely, it also relieves family and friends of the burden of responsibility inherent in the undertaking of the day-to-day management of someone else’s affairs.
Trustee Companies are well placed to assist with the establishment of perpetual charitable trusts. These trusts have grown from an interest in philanthropy by private individuals and by corporate organisations wishing to channel part of their commercial wealth into charitable foundations. Perpetual charitable trusts provide long-term benefits both for the donor and for the beneficiaries. Law changes now require all charitable organisations to register with the Charities Commission. Registration is essential if charities are to keep their tax-exempt status.
TCA continues to work closely with the Ministry of Economic Development and the Securities Commission with regard to the recently enacted Financial Advisers Act and the Financial Services Providers (Disputes Resolution) Act. Considerable focus has been given by TCA members to determining the impacts of these Acts which were written with financial planners in mind rather than Trustee Corporations. We have been working to understand the many implications of the new legislation and attendant regulations and how they will operate within Trustee Corporation organisational structures.
The new legislation was in place by June 2010 and TCA members will apply the regulatory changes to their business models and have those in place when the regulations come into effect on 1 July 2011. The Code of Professional Conduct for Authorised Financial Advisers came into force on 1 December 2010.
The new regulations surrounding Enduring Powers of Attorney and the process of how they are completed have seen significant change. The more robust and rigorous process that now exists is of greater benefit to our customers but the side effect of its extra complexity impacts on Trustees’ interaction with those customers and therefore has increased customer cost. TCA’s view is that greater engagement by its members will reduce both complexity and costs.