Often individuals are appointed as the Trustee of a trusted friend or family member’s family Trust. Should, for example, the Trust’s founder pass away and the surviving spouse or the founder’s children wish to sell the Trust assets and dissolve the Trust, may the Trustee be in a position legally to acquire any of this property?
The Trustees are appointed to the Trust to manage the Trust and its assets in the best interests of the beneficiaries to the Trust, which in the above example will be the surviving spouse or children of the founder. Which means, if the beneficiaries wish to sell the assets and dissolve the Trust, the Trustees should consider their wishes but ultimately the final decision to do so lies solely with the Trustees in line with the provisions of the Trust Deed.
So, what happens if the Trustees decide to sell but one of them wishes to acquire as well? Is there a conflict of interest? Is it in line with your duty as Trustee?
Firstly, it is important to ascertain whether or not the Trustees have the power to buy and sell property on behalf of the Trust. Secondly, the Trust Deed also stipulates how decisions of Trustees are to be taken. A further factor to consider, is the fiduciary duties that a Trustee holds in respect of the Trust’s property and to the Trust’s beneficiaries. The governance of a Trust is completely in the hands of its Trustees and all assets, liabilities, rights and duties of the Trust reside in them, i.e. a Trust functions through its appointed Trustees and the legal personality thereof requires that all Trustees act together for and on behalf of the Trust.
Buying property from a Trust, should be approached with caution if you are also a Trustee of the Trust.