NSW Clause in Trust for a minor

[snoop]

Hi, Am I able to include a clause in a Trust that allows the Trustee to use funds from the Trust to extend their home if required to assist in raising the beneficiary of the Trust but stipulate that the Trust must become a part owner of the property via a tenants in common arrangement? could this be contested by the Trustees?.

I am checking now to ensure there is a clause which also accommodates the Trustees buying a property using the Trust funds, that the Trust is to be the sole owner of the property. Is it possible to stipulate in this situation that the Trustee must exit the property upon the beneficiary gaining control of the Trust.

I know this wounds mean, however all potential Trustees/Guardians own multiple properties and Investments. I am wanting to ensure my daughter does not reach 25 to find the bulk of the Trust gone due to the Trustees having free rein.

 

[Rob Legat - SBPL]

Probably not. The general stance is that trust and non-trust property cannot be mixed. Having the title owners as the trustee and the trust would possibly contravene that rule.

If it were allowed, and a discretionary power, it's doubtful they could be compelled to invoke it given its potential to impact the trustee's circumstances. And that's another reason why it probably wouldn't be allowed - as the trustee would be placed in a conflict situation between their own interests and those of the beneficiaries.

As for the trust buying property and the trustee residing in it, that can be okay in certain circumstances. However, beneficiaries don't get 'control of the trust' - the property either remains in the trust, or is removed from the trust and distributed to the beneficiary.

In any case, trustees are under fiduciary duties to act in the best interests of the beneficiaries. If they waste the trust property, they're opening themselves up to claim against themselves personally.

 

[snoop]

Thanks for the quick response Rob. I know I should trust them, but I have known people who have had their Trust fund frittered away by Trustees. Given all potential Trustees are very well established financially could I then have a clause which prevents them from using any funds which would provide a personal financial asset benefit? - an extension of a house would fall under this as it would mean additional bedrooms/square footage.

 

[Rob Legat - SBPL]

You can, of course, limit the trustees power in that respect. Trustees should be avoiding any transactions which are for their direct benefit in any case.

It's also worth considering that a trustee involves 'trust' - hence the name. If you don't trust someone, don't appoint them. Or at the very least, appoint a number of trustees jointly so that they can check and balance each other.

 

[snoop]

Thanks so much for your advice. You are right I do either need to Trust them or not put them down as Trustee.