Many times, during the creation of a Last Will and Testament, a Testator will decide to create a discretionary or family trust. This makes the Testator also the Trustor of the Trust. Oftentimes this is done to protect children under the age of 18 or those who are unable to handle their own financial affairs with the necessary care and aptitude. But it can be done simply to ensure that the Testator’s assets are distributed for the purpose and in the manner that they intend.
The Trustor needs to make a few very important decisions in the making of a discretionary or family trust, these decisions include;
- Naming a trustee
- Naming the beneficiaries of the trust
- Determining for what purpose and how the trust funds will be distributed
The Trustee will be the individual who will have a legal and fiduciary duty to properly oversee the value of the trust and the distribution of the assets to the beneficiaries. The beneficiaries will have a right to some part, or all, of the trust assets. The Trustor’s wishes as to how the trust is to be distributed will be contained in the body of the Trust, itself.
Once a beneficiary has been included in a Trust, it can be difficult and complicated to remove them as a recipient. However, it is possible to remove a beneficiary from a Trust. Before a beneficiary can be successfully removed from a Trust, it is imperative that the directives for such removal, as stated in the Trust itself, be reviewed and precisely followed. In addition, the Trustee must be acting in good faith and for the betterment and protection of the other beneficiaries.
The Trust Deed is the controlling part of the Trust that will give guidance and instruction as to how a beneficiary can be removed from the Trust document. Usually there are two ways in which a beneficiary can be removed;
- The beneficiary can sign a legal document renouncing their interest in the Trust assets
- The Trustee can use their discretionary power to remove an individual as a beneficiary by following the instructions in the Trust Deed
The discretionary power to remove a beneficiary from the Trust must be clearly granted via the Trust Deed.
Once it is established that the Trustee has the power to remove a beneficiary from the Trust, the Trustee usually must prepare a Deed of Variation. This is a document that states that the Trustee intends to use their powers of appointment to change the beneficiary pool. The generating of a Deed of Variation must be in full compliance with the instructions contained in the Trust Deed. Once executed, the Deed of Variation must be kept and incorporated into the original Trust document.
However, it is also important to recognize that on occasion a Trustee may have a disingenuous reason for attempting to remove a beneficiary from a Trust. If this occurs the beneficiary does have the right to question and seek legal assistance and guidance to prevent themselves from being removed as a Trust beneficiary. As a beneficiary, if you believe that the Trustee of your Trust endowment is attempting to remove you for a reason that is improper, or by a means that is inappropriate and not endorsed by the Trust Deed, you should seek legal advice immediately.
If you find yourself in need of assistance with this, or any other legal issue, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 770 780.