Evidence Uncovers Trustee Weaknesses

8 January 2007

Evidence Uncovers Trustee Weaknesses

2006 has uncovered what many trust experts have known for some time, the majority of trusts are at risk of being successfully challenged, and there are some common trends emerging. The top 5 trust issues identified in 2006 are:

1. Not all trustees are involved in decision making
2. Formal trustee meetings are not being held
3. Trustee decisions are not being recorded in writing
4. Gifting is not being completed either on time or at all
5. There is widespread intermingling of trust and personal and/or company finances

“These top five issues are the most common we find during our Trust Warrant of Fitness reviews however it is not an exhaustive list” says Mark Maxwell, Chief Executive for Trust Management Specialists - Integrity Trust Limited.

Any one of the issues above is like a beacon to those wanting to challenge a trust. They tell the would-be challenger that there are chinks in the armour and therefore further investigation is warranted. It is this further investigation that uncovers the ammunition the challenge needs to be successful.

“More often that not those looking to challenge a trust will give up early if the basics are done well” says Maxwell. The basics include all trustees taking an active involvement in trust matters and the keeping of good trust records. In particular the keeping of good trust records will provide the evidence of sound management that will see off many of those would-be challengers.

Many of those that have purchased trusts over recent years have not been informed of their obligations after the trust has been established and this has led to the current situation where anecdotally around 75% of trusts are at risk of being challenged, many for the reasons highlighted above.

The results of the Integrity Trust online ‘Trust Bust Test’ suggest that 72% of trusts have at least some risk, with 22% being at serious risk of a successful challenge. “These figures certainly back up what we are uncovering through our reviews and it is something trustees need to start taking seriously if they are to avoid potentially expensive personal liabilities” says Maxwell.

Trusts are a fantastic way to protect ones assets from future adverse events but only if managed correctly and the evidence certainly suggests the majority are offering little protection currently.

Mark Maxwell is Chief Executive and co-founder of Integrity Trust Limited www.integritytrust.co.nz, a company specialising in trust management. Mark has extensive experience in the trust industry after a 17 year career with Public Trust where he held a number of senior roles, including General Manager of Charitable Services and National Manager, Trustee Services Development.

ENDS

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