Trustees Need to be Aware of the Risks

If you are going to be appointed a trustee, you have to be aware of your responsibilities you will have under the law. People think that it is just as simple as signing a document, receiving the cheque and handing it over to the beneficiary. There is more to it than what you see in other people. There is, in fact a Trustees Act. This was drawn up to guide trustees on how they should act, what they should do and the consequences they will face if they fail to perform any of their obligation.
It has to be mentioned, though, that a trust deed can veto the act. The trust deed may contain provisions that can override or supersede the prudent investment requirement. However, these provisions and the intention to supersede the act must be explicitly expressed.
For example, a land strictly kept within the family. This may be done by making the land a part of the trust and this intention must be clearly stated in the trust otherwise, the land may be sold if it becomes wiser or more practical for every beneficiary. These kinds of instances have happened more than once and that is why it is important for lawyers and everyone involved to be clear about this intention.
This is one example of how a trustee becomes legally liable. The trustee will be responsible in protecting the interest of the beneficiaries. The trustee will have to take the lead in informing the lawyers, financial advisors and everyone concerned in the need to make in clear on the deed. When the deed is drawn up , the trustee will also have to review it to make sure the entire document is solid. Error in any step in the process can result in a lawsuit.
The act clearly states that the trustee is also responsible in making a “prudent investment”. There is some confusion on what “prudent investment” exactly means. Financial advisors often emphasize the need to spread out the risks to different investment and lawyers emphasize the need to protect the future with full consideration to how taxes may affect it.
It is essentially different meanings to different people. The most important thing for trustees to consider, or would-be trustees, is that they must take their obligations seriously.