Many of the thousands of people who have established trusts in recent years are now facing unexpected legal bills to change trustees.
Thursday, December 7th 2006, 12:00AM
by The Landlord
These bills can run to thousands of dollars depending on the assets held in the trust.
As the trust industry matures over the coming years, there will be an increase in the number of trusts requiring changes to their trustees. These changes can be for a number of reasons, such as firing inactive trustees, replacing trustees retiring from practice or even the death of a trustee.
“The documentation required to change trustees is fairly straightforward,” says Mark Maxwell, chief executive for trust management specialists Integrity Trust Limited. “Where significant cost can be incurred, however, is in transferring the assets into the names of the new trustees.”
Generally, the most expensive asset to transfer to new trustees is property. This is because the title must be altered to reflect the new owners, and if there is a mortgage, replacement documentation is needed as well. This involves roughly the same work for your lawyer as a normal property conveyance. It will cost hundreds of dollars to change a trustee of a trust even where the family home is the sole asset.
“The issue of costs for changing trustees is has often not been fully explained to clients,” says Maxwell. “The question of who will pay these costs is an interesting one. For example, should a client pay for a retiring lawyer if it is at the lawyer’s request?”
“We are seeing clients regularly that are not happy paying these costs mainly because they were never told they would have to”.
While there are a few things that can be done to avoid some of these issues, such as having a corporate trustee, Maxwell says the most important thing is to choose your trustees carefully. “Having a professional independent trustee is not always the answer. It may be better to appoint a good friend as independent trustee, but be supported by a professional to ensure all duties are discharged.”
