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UNIT TRUSTS:RMB Balanced Fun... A spurt of growth upon retiremen... Has Wall Street succumbed to "mad bull" ... Betting on a bottle of the best bubbl... Taking on the role of trustee ... |
Taking on the role of trustee can cost a dear friendship
ESTATE PLANNING
THINK twice when a friend asks you to act as a trustee for his trust fund as you will be exposing yourself to many risks. As a trustee you have many responsibilities, and if you do not live up to these you could be held liable for any losses that the beneficiaries of the trust may suffer. A trust is usually formed to hold and administer assets for the benefit of the trust's beneficiaries. The operations of a trust are governed by a trust deed that is registered with the master of the Supreme Court. Typically, three trustees are appointed for every inter-vivos trust (a trust fund you set up while you are alive), or a testamentary trust (which is set up in terms of your will and comes into existence only on your death). Most people call on friends and family to act as a trustee. If asked, be aware of what you are letting yourself in for. Chances are you will not get paid for the job, you won't pay much attention to what your friend does with the trust, you will agree to whatever they want to do with the trust funds, and will sign anything he puts under your nose. Betsy Piek of legal firm Jay Incorporated says: "Most trustees are nonchalant about the office they hold, and they should not be. It's common for a trustee to be dictated to by other trustees, and he may acquiesce without ever applying his mind to the matter while still carrying the risk of being fully liable for this decision. "The law requires you to look after the assets in the trust with more diligence and skill than you would handle even your own affairs. If you do not exhibit the required degree of care and skill, then the beneficiaries can hold you liable." An example of when a trustee can be sued for negligence is where he allows the trust assets to be used as surety for a loan, where there is no benefit to the trust or to the beneficiaries. Piek says if you are a trustee, and you think decisions are being taken without your being consulted and that you may not be getting all the facts, then your best move would be to resign your office immediately. If you take this step you should ensure the master of the Supreme Court has a record of your resignation and that you get an amended letter of authority, otherwise he will consider you to still be a trustee and you could be held liable for poor decisions made after you thought you had resigned. Other prescribed duties of a trustee include ensuring you do not personally gain from the trust fund, you do not have a conflict of interest with the trust, you do not borrow funds from the trust and neither should you acquire assets from the trust. You are also not allowed to turn a blind eye to something that is happening and resign. If you are aware that something untoward is happening, then you are required to take action, which may entail reporting the matter to the master.
It is recommended the only time you should agree to being a trustee of a trust is when you are properly remunerated for the services you are rendering and can therefore carry out your duties with the care, diligence and skill required.
If you have been approached to be a trustee for a trust fund not yet created, Piek advises that you look at the trust deed and get advice from a professional on the requirements of the act, as well as your common law duties and obligations.
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