We are commonly asked how many trustees should be appointed as well as just who it is appropriate to appoint. Today we hope to address this.
How many trustees are required differs depending on whether the trust holds land.
Where a trust holds land, no matter what type of trust, a minimum of two trustees or a trust corporation are required. This is because at least two trustees are needed to give valid receipt for capital monies arising under a trust (e.g. sale proceeds).
Where the trust holds land there may be a maximum of four trustees. If more than four are named then only the first four may act.
Where a trust does not hold land there is no restriction on the number of trustees. That said, it is still advisable to have between two and four trustees so that the trust may later acquire land. It is also best to avoid having a sole trustee to avoid delays in administration if the sole trustee dies or becomes unable to act.
Trustees should be people who the settlor or testator quite literally trusts, be this a professional, a family member or a close family friend. After all, they are being trusted to hold their assets and look after the best interests of the beneficiaries.
Every case will be different so there is no hard and fast rule for who should be appointed as a trustee. Who is appropriate may depend on the size and complexity of the trust. It may be perfectly fine to appoint a couple of family members to look after a small family trust for the benefit of the testator’s children, but less appropriate to appoint them to administer a complicated and valuable Flexible Life Interest Trust or a trust of the testator’s business. In the latter cases trustees with specialist knowledge may be required so it may be more appropriate to appoint a professional trustee; either to act alone or with family members.
Another question we commonly encounter is whether it is acceptable for a trustee to be a beneficiary of a trust. While it is perfectly possible you ought to consider the potential conflicts of interest this may cause. Again, this will vary by case. Potential problems can arise in cases where a balance is not struck or both sides of a family are not represented in a family trust. In many cases it will be fine for the surviving spouse and one of the adult children to act as trustees and be beneficiaries; less so where there is a ‘blended family’ and there’s a risk of conflict between them – remember, the trustees must act unanimously unless the trust deed includes an express power to act by majority.