Accounting - Trustee duties and performance experts

Introduction

Trusts are legal relationships formed between one or more people or entities (the trustees) and another person or people, (beneficiaries) where the trustee(s) manage property at all times for the benefit of the beneficiaries. This obligation is performed with certain duties established in the document known as the Trust Deed.

Experts in this field are professionals in performing the duties as a trustee. The trustee’s primary responsibility is to act personally and impartially in accordance with the Trust Deed. In addition to the Trust Deed, there are several responsibilities placed on trustees by both common law and legislation. One of these duties is that the trustee must preserve trust property (both income and capital) against loss and maintain it in good order. Another trustee duty is to exercise reasonable care and skill, in the same way that an ordinary business person would expend in managing similar affairs of their own. Furthermore, a trustee should favour one beneficiary over another.

While trustees are entitled to be reimbursed for their expenses, trustees must not make a profit out of the trust. Trustees also have a duty to keep compliant, up-to date, and accurate accounts and make them available to a beneficiary on request. Trusts have to lodge annual tax returns with the Australian Taxation Office just like other business entities, and trustees normally see a registered tax professional or accountants for advice, for financial statements, and assistance in the lodging of the tax return before
the due date.

A trustee who has been appointed as director of a corporate trustee is also subject to director’s duties under the Corporations Act 2001 (Cth).

The Trust Deed will stipulate what powers the trustee has e.g. whether the trustee has authority to sell, mortgage, lease, insure, and settle claims against trust property. If the trust deed doesn’t cover the sale of property, the trustee must seek a court order and the consent of the beneficiaries. The trust deed may also cover whether the trustee has the power to repair or improve the property.

Where the trustee has breached their duties, or failed to administer the Trust Property in accordance with the terms of the Trust Deed, they will become liable to account to the trust for any loss caused by their failure to perform their duties (and to offer restitution so that the property is returned to the previous state).

A trustee may be able to defend against a claim for breach of their duties if the can demonstrate that they acted honestly and reasonably at all times in exercising their duties. Experts in this area usually come from a finance or economics background, their highly specialised knowledge allows them to navigate the operation of trust deeds to a significantly competent extent. The specific specialisation and background needed in your trustee expert will be determined by the matter which requires examination.

At the bottom of this profile are brief details of a number of the experts that Expert Experts represents. Call our office to discuss your requirements and to obtain a recommendation that suits your needs and budget.

Expertise in Action

Experts in the field of trusts may be asked to give an expert opinion as to the whether trustees acted honestly and reasonably in performing their duties in accordance with the trust deed. They can offer opinions of the trust deed, comparing with the legal clauses in trust deeds in similar industry sectors. Experts can offer opinions in cases where beneficiaries and trustees are involved in litigation and whether the accounts were drawn up impartially, accurately and in compliance with accounting standards.

Sample Reports

For some fields of expertise we have some sample sections of de-identified reports. Please contact our office if you are interested in a sample.

Cost

The overall cost of expert opinion depends on the services required. Some of the key factors that affect the cost of advice include:

• The need for a view or inspection of a location
• The quantity of documentary material to be reviewed
• Whether there are reports of other experts to be reviewed and commented on in detail
• Whether there is a need for conferences with the expert either in person or by telephone/Skype

Relevant Articles Approving a trustee's remuneration

The Australian Financial Security Authority (AFSA) and the Australian Restructuring Insolvency and Turnaround Association (ARITA) have jointly developed a resource for creditors on trustee remuneration.

Trustees and beneficiaries

The trustee(s) (there may be more than one) of a trust may be a person or a company (the latter is known as a corporate trustee). In either case, the trustee must be legally capable of holding trust property in their own right. The trustee holds the trust property for the benefit of the beneficiaries. Where the trust is established by deed (which in the case of a deceased estate is the will), the trustee must deal with the trust property in line with the intentions of the settlor as set out in the trust deed. They must also act in accordance with the relevant state or territory law regulating trusts, and with any other applicable law, including tax law.

Relevant Cases Lane (Trustee), in the matter of Lee (Bankrupt) v Deputy Commissioner of Taxation [2017] FCA 953

The case concerned itself with the issue of whether the trustee’s right of indemnity out of certain assets can be utilised for the purposes of meeting the claims of “non-trust” creditors or the claims of the trustees in bankruptcy for their expenses.

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