Common Mistakes in Trusts: Understanding the Critical Role of the Appointor
I’ve been seeing a common issue with trust deeds lately. Often, clients’ wishes don’t come to fruition because of a key oversight when setting up the trust—misunderstanding the vital role of the Appointor.
In this video, I explain what the Appointor does, why it’s so important, and how you can make sure your wishes are followed by getting this right.
If you have any questions about trusts, trust deeds, or estate planning, drop by Millens. We're here to help.
VIDEO TRANSCRIPT
Ross Millen:
Hi. The last few weeks at Millens, we've been helping some of our clients with their trusts. Now, trust 101, remember, a trust is like a set of rules where someone owns an asset, that's the trustee, and they hold it on this set of rules for the benefit of the beneficiaries. So our client, I had one particular client who said, "Well, obviously the trustee is the most important person in this. They make the decisions, and so I control the trustee." And then I said, "Yeah, but in a discretionary trust, there's also a person called the appointor, and the appointor has ultimate power because they're the person that can basically remove the trustee and appoint a new trustee." So if the appointor says that the current trustee is not doing what they want, they can replace them with a new trustee that will do what they want or is under their control. So the appointor is really the most important person in the trust.
Now, this was important for this client because his son was in the business, and the business was in the trust. So he wanted his son to become the appointor. And he said, "Well, I've provided in my will that when I die, my son becomes the appointor." That's fine, but the problem was that whoever drafted that will hadn't looked at the trust deed itself, because the trust deed said that when the appointor died, then their legal personal representative or their executor became the appointor. So there was a misconnect between his will and what the trust deed said.
So very importantly, we read the trust deed. We told him what was in it. We made some amendments to that trust deed, which we're allowed to do, and we made sure that he could actually appoint his son, the appointor, on his death. So don't rely on... You must read the trust deed. That's rule number one, but the other thing is, if you're looking at passing on control of a trust, looking to do your estate planning, come to us. We'll read the trust deed. We'll make sure everything works as you intended, and you don't find, well, you wouldn't find anyway, but your family doesn't find that what you planned doesn't actually happen. So remember, any queries about trusts, or trust deeds, or your estate planning, come and see us at Millens. We're here to help.
