with Don Fraser
Fraser Farm Finance
What are your responsibilities as a trustee and what do you need to consider as one?
I have seen trustees appointed to family trusts and they really have no idea what their responsibilities are and what they need to do.
I know where two trustees were appointed on an untidy large farm. They set about spending every cent on new races and buildings and so on, only to run the coffers dry with no increase in productivity. They then put their own stock on the farm and favoured one beneficiary to take over the property.
Trusts are a great vehicle to carry property from one generation to the next. However, you are dependent on your trustees, when you have vacated this earth, to make the right decisions on your behalf and look after family and the assets of the trust.
The selection of “good” trustees is crucial to your ongoing peaceful rest when you are dead.
Successful trustees for farming
They need to be:
ü Able to look at things objectively, not from their own point of view
ü Understand commerce and accounting matters
ü Have an understanding of legal matters and contract law
ü Not be so old that they cannot function properly
ü Understand what the settler wanted and try to maintain his/her expectations and standards
ü Be able to stand up for the settler against very persuasive members of the family who will see it differently
ü Be able to run a meeting
ü Have honesty, objectivity and integrity
Beneficiaries under the trust do not make good trustees. They can be heavily influenced and feel huge pressure from other family members.
Solicitors and accountants like to be trustees as it keeps them involved and in the cash-flow, but many do not make good trustees. They find it hard to be objective and even harder to make decisions which are necessary. Because of their legal liability, they would rather just advise.
Accountants do have a good understanding of GST, tax and accounting matters and the day to day activity of the business, but again must remain objective.
Some trustees have a separate company for every trust they are on.
So, the caveat here is if you are asked to be a trustee make sure you are competent to do the job and make tough calls. More importantly for you, ensure that the trust that you may be a trustee of is financially secure and viable and that everybody involved is honest. Dishonesty in this area will bring you down that fast you will wonder what happened.
A trustee should be well informed before accepting the role and well informed during the role.
Disclaimer – These are the opinions of Don Fraser of Fraser Farm Finance.
Any decisions made should not be based on this article alone and appropriate professional assistance should be sought.
Don Fraser is the Principal of Fraser Farm Finance and a consultant to the Farming Industry. Contact him on 0800 777 675 or 021 777 675
A disclosure document is available on request.