Why?

Why, given our prediction for trusts, are we not managing them appropriately?
A recent survey revealed that nearly 25% of family trusts are being run so badly they face being deemed a sham if tested in court. Furthermore, in an online survey only 29% of trusts were classified as adhering to good trust management principles. 32% of the 1000 surveyed handled the trust so poorly they had a high chance of being deemed a sham trust. This would mean the court would take the view that the trust never really existed and the assets never passed out of the ownership or control of the settlers, leaving them vulnerable to creditors or means testing for rest homes or could pull assets into the matrimonial property net.

Here are some tips for you
• All trustees should have copies of documents like the trust deed and have read them over the past 12 months
• All should be involved in trust decisions
• Have annual formal meetings
• Record decisions
• Have annual statements prepared each year

Additionally check if gifting is completed each year, create a written investment plan, are relevant insurances and investments in the name of the trust, do you have a separate trust bank account, is the trust free from borrowings and has all trust property been maintained?

If you can’t answer these questions satisfactorily your trust may be in danger of being a sham trust.