Does someone you trust make a good trustee?

Is trusting someone enough?

When appointing a trustee for your family trust, you might look to your spouse or a friend who you know “has your back”. But you could be unintentionally doing them a disservice.

Here’s why: your trustee has to do a lot more than make good decisions for your trust. They are expected to have a fairly high degree of understanding of how trusts operate, and can be held personally liable for mismanagement even if it was unintentional.

The trustee is expected to:

• be someone who can manage the affairs of others with “care, diligence and skill”

• have a good understanding of your trust deed and its provisions

• ensure that the trust operates correctly, in accordance with the Trust Property Control Act

• be aware of other acts and laws that the trust must adhere to (Property, Income Tax, our Constitution, and more)

• oversee other trustees’ behaviour and ensure no trustee dominates the others.

If you appoint a trustee who doesn’t have these abilities, they are likely to follow the lead of other trustees, and sign such documents as are presented to them. Should events take a turn for the worse, and the trust is challenged by a 3rd party, your trustee can be personally sued for damages. “Ignorance of the law is no excuse” as the saying goes. A trustee cannot claim that they didn’t know what was happening, or that they weren’t aware of the laws and rules they were appointed to uphold.

Even if a trust administrator is appointed, the trustee is not excused from their role as overseer, and is expected to be actively involved.

Clearly it takes more than trust to make a good trustee. Think carefully about who you appoint. And should you be asked to be a trustee of someone else’s family trust, be aware of what is being asked of you.