Family Trusts And Investments

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Does your family trust have investments?

Thursday, May 2nd 2002, 7:48PM

Does your family trust have investments? If the answer is "yes", is the Trustee aware of his or her responsibility with regard to investments under the Trustee Amendment Act 1988?

Under the Trustee Amendment Act 1988, a Trustee must ensure that all investments held in Trust are managed and reviewed prudently. The Act requires the Trustee to have due regard to the following, in exercising powers of investment:

1. The desirability of diversifying Trust investments.
2. The nature of existing Trust investments and other Trust property.
3. The need to maintain the real value of the capital or income of the Trust.
4. The risk of capital loss or depreciation.
5. The potential of capital appreciation.
6. The likely income returns.
7. The length of the term of the proposed investment.
8. The probable duration of the Trust.
9. The marketability of the proposed investment during, and on the determination of, the term of the investment.
10. The aggregate value of the Trust assets.
11. The effect of the proposed investment in relation to the tax liability of the Trust.
12. The likelihood of inflation affecting the value of the proposed investment or other Trust property.

>There have been cases in the past where Trustees have been taken to Court for not acting in a prudent manner in relation to investment practices. If you are a Trustee, it is imperative that you are familiar with the requirements of the prudent person regime, which arises under the Trustee Amendment Act 1988.

If you have a family trust that has investments, you should ensure that the Trustee is managing the investments prudently.

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