Mid Mountains Legal Blog

Trustee of a Deceased Estate (NSW)

Anthony Steel

A Trustee is a person responsible for administering a trust. If a Will contains within it or establishes a trust, once the Executor has completed their duties the role of the Trustee begins. The Trustee becomes the legal owner of all assets held in the trust and manages them according to the trust terms.

A Trustee should be someone the testator trusts implicitly. They could be a family member, a friend, a lawyer or accountant. They should either have or seek legal and tax knowledge.

Most testators nominate the same person to act as Executor and Trustee but a different person may be nominated for each role.

When a Will creates a trust, the Trustee’s role can continue for a period nominated by the testator. In NSW, a trust can exist for up to 80 years.

Duties

Some duties and powers are contained in the trust document, which is often the Will itself. The duties depend on the type of trust being administered. The Trustee may be required to:

  1. preserve and manage estate assets for minor beneficiaries until they turn 18 (or a specific age nominated by the testator);
  2. administer accounts and lodge tax returns for trusts; and
  3. preserve and manage estate assets placed into a testamentary trust created on the death of the testator.

However, they must always:

  1. exercise the powers of a Trustee in the best interest of all beneficiaries of the trust;
  2. take advice;
  3. act impartially toward beneficiaries and different classes of beneficiaries; and
  4. invest trust funds in investments that are not speculative.

A Trustee’s duties which have arisen from court-decided law include a duty to:

  1. obey the terms of the trust;
  2. keep trust property separate from their own;
  3. keep accurate trust records and account to beneficiaries;
  4. act in the best interests of the beneficiary;
  5. exercise powers in accordance with the trust (i.e. make decisions, and at an appropriate time);
  6. invest trust funds responsibly;
  7. perform Trustee duties without payment or compensation, unless authorised by the trust terms; and
  8. not delegate responsibilities, unless authorised by the trust terms.

Investments

Unless a trust document states otherwise, a Trustee can at any time vary an investment and can invest funds in any form of investment. The Trustee must exercise the care, skill and diligence that a prudent person would exercise in managing the affairs of other persons, whether or not their profession, employment or business involves investing money on behalf of others.

When choosing an investment, they must consider factors such as:

  1. the results of a review of existing investments;
  2. the purposes of the trust and the needs and circumstances of beneficiaries;
  3. tax liability and inflation;
  4. the diversification of investments;
  5. the term of the investment compared to the likely duration of the trust;
  6. the nature and risk of investments;
  7. maintaining the value of the trust;
  8. depreciation, appreciation and income; and
  9. associated costs.

A Trustee has the right to obtain independent and impartial investment advice and pay for this from trust funds.

Property

A Trustee has the power to insure, lease, mortgage, sell, repair or improve trust property. They can also carry on a business using trust property.

They can use trust funds to reimburse themselves and pay expenses incurred in executing the trust.

Breaches

The Supreme Court of NSW can take action if a Trustee breaches their responsibilities. In determining the Trustee’s liability, the court can consider:

  1. whether the Trustee considered the factors for investment appropriate to the circumstances of the trust;
  2. the extent to which the Trustee acted on independent and impartial advice of a person competent to give the advice;
  3. the nature and purpose of the trust; and
  4. whether the trust investments were made using an investment strategy in accordance with a Trustee’s duty.

If a Trustee make an investment that causes a loss, the court can set off part or all of the loss against part or all of a gain from any other investment.

If a Trustee commits a breach at the instigation or request of a beneficiary, the Supreme Court of NSW can order the impoundment of part or all of the beneficiary’s interest in the trust.

When a Trustee neglects or refuses to collect income of a property, to sell a property, or to sue for or recover a property, the Supreme Court of NSW can make orders compelling the Trustee to act.

Where to now?

Contact us if you need advice or representation regarding your duties as the Trustee of a Will.

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