Director of trust and death

Hi,
My husband and his brother are both directors of a trust containing property. This was passed from their deceased father.
I have found out that he and his brother have added a clause so that if either of them die, their sister then becomes second director.
My husband has serious health conditions and minimal life insurance as he developed these health issues in late twenties and therefore cannot get life insurance. It is a very real possibility that he could die early.
We have 3 young teenagers. Does this new clause mean myself and kids have no chance of this property going to us if anything happens to my husband??
I am feeling very betrayed and shocked but also want to know practical implications of what may eventuate.

 

trusts don't have directors.
where was such a clause added?

You need to seek out legal advice asap.

 

Hi Terry,
I do not understand all the legal terms.

They are directors of a company (ABC) in its capacity as trustee of the ABC family trust.

The new clause is called ‘Resolution of Directors’ and is a one page document. It outlines who will be appointed as new director upon death of current director.

To get legal advice do I need to go with my husband or can I go alone? I obviously will need to take the documents.

 

A lot of questions.
who are the shareholders of the trustee company and what does the will for each shareholder say?
Who is the appointor?

 

Its likely that the document will be ineffective. Who are the shareholders of the company? It is generally shareholders who vote on the directors.

You could get legal advice and should take all company docs such as constitution, shareholder records etc.

but more importantly is the control of the trust via the appointor position as the appointor could usually just remove the trustee anyway.

 

Talk to your husband.
He'd be aware of his health and he chose to do this.

 

I'm not a lawyer so I'll give my opinion on this and it might not be accurate.
There is a trust with a corporate trustee which holds property (pl?) that as part of the will the trust control was given to your husband and his brother. This doesn't mean that they own the assets in the trust but they control it. They are seeking to give the sister the other half of the control should either of them die.
It is quite possible that the beneficiaries of the trust are currently the 3 siblings. There may well be something in the trust deed which outlines what happens if one of the siblings dies and their beneficiary share may be passed down to their family (you and the kids)
I don't think you should be feeling betrayed because it is unclear how the assets of the trust where intended to be handled. Was the initial intent for the trust's assets to provide additional income to the 3 siblings and is that how it currently operates? How does the trust cater for subsequent generations - how is the income divided and distributed
To me it is more about understanding who the beneficiaries are than who the directors are of the corporate trustee.

 

I suspect the trust has a company as trustee and the persons are trustee Directors.
On death of a Director what are the rules and process for appointing others ? Is their choice contained in the COMPANY rules or that of the trust deed? This may need legal advice. The legal advice needs to conside the company, trust deedand who the trust appointors are. Trust appointors can remove the company as trustee rending such a change futile. Beneficiaries may also have the ability to seek legal remedies to limit a Director acting to change or limit benefical entitlemnets.

Legal advice needs to consider who the trust benefits. It wouldnt just be your immediate family I suspect. I saw a case a few years back and a change of trustee control can have serious and dire consequences and be quite legal to deprive benefits since intended beneficiaries may be just part of the intended beneficiaries so lack capacity to demand anything. . The remedies are quite expensive. A high profile example was Michael Hutchence of INXS. He had an adviser who was cunning in seeking MH had asset protection. He had so much that this adviser acted to empower himself to cotrol the trusts and stripped assets and made trust changes. The court couldnt fault his capacity and so MHs family and kids got...nothing.

 

I didn't quite have that title years ago but I was known as "The Terminator"

 

Thanks all,
My limited understanding is that the 2 trustee directors have control over what beneficiaries can receive and they can change beneficiaries. Current beneficiaries are 3 siblings but at this point everything stays within company. Nothing in deed discusses grandkids.

My concern is that if my husband passes and is no longer director- myself and kids are out of the picture completely.
He has said in the past that he wants to keep the inheritance in the family. Meaning his siblings as it came from his parents.

Think I’ve been a bit naive and trusting thinking he would ultimately prioritise his share to kids and I.

I do have to have a long discussion about the decision and it’s effect on us, but was trying to understands things more first. It’s probably too late now change has been drawn up by solicitor and signed by both parties.
Will get some legal advice as suggested.

Have also been doing some deep thinking and ultimately inheritances are about more than money. They are about who is a priority in someone’s life. Inter generational wealth plans and trusts may ‘keep it in the family’ but at what emotional and financial cost to a future or current spouse who may provide more love and support than a blood relative.

 

The other thinking is who does the trust distributions go to at present? @Bonni - As a TT, it's tax efficient to distribute to the kids who are under 18 as they're taxed as adults, if you are also a beneficiary and have received distributions, why would you believe that this would cease as your kids are also the grand kids of your in-laws and descendents.

 

With assets of a discretionary trust there is no inheritance. The assets cannot be passed on via will. No beneficiary has any rights to the assets either. There are no shares or percentages. The only right a beneficiary has is to property administration of the trust. It might be best to get the trustee to wind up the trust now while there is still some sort of control

 

Its often wise to leave a entitlement that is deferred until the minor/s reach a age of maturity. And that seeks to exclude well intentions or badly intentioned acts of others. Insurance bonds can be a tax effective alternative that leaves the administration to independent parties. eg The insurance co.