Trustees will be required to make decisions when managing the affairs of a trust. It is important that trustees have an effective decision-making process in place, give due consideration to the terms of the trust and other trust documents, and record decisions properly.
This should avoid a breach of the terms of the trust and enable trustees to manage the trust efficiently.
There is no prescribed process to follow so trustees can decide to adopt their own procedures for decision-making. Planning ahead is crucial as it ensures sufficient time to consider a decision at hand and gives all trustees due notice of the meeting to be convened if required. Trustees should also receive sufficient information in advance of the meeting to ensure that they fully understand the nature of the decision at hand.
Trustees should consider the terms of the Trust Deed, Memorandum of Wishes (if any), the nature and value of the trust assets and investments, circumstances of the beneficiaries and the duties of the trustees when making such decisions. Typically, unless the Trust Deed specifies, decisions must be made unanimously where there is more than one trustee.
Trustee decisions may be made at a meeting of the trustees, by written resolution or by deed as determined by the terms of the trust. Many trustees prefer to make decisions by written resolution as they find meeting with other trustees too burdensome. However, it is highly recommended that trustees convene a meeting at least annually to discuss the affairs of a trust.
The Trust Deed will dictate that certain decisions need to be made by deed and the trustees should possess the necessary skill and experience to be able to prepare the relevant deeds and ensure that they are executed and recorded in a correct manner.
Minutes should be prepared to document a meeting and the decisions made by trustees at the meeting. In order for the decisions to be valid, the quorum and other procedural requirements need to be satisfied. The finalised Minutes should be circulated to all attendees and stored in the records of the trust.
Trustees have a duty to act personally. They must be involved in trust decision-making and act personally in the process. Beneficiaries or other parties should not dictate how discretionary trustee decisions are made.
It is crucial that the trustees of discretionary trusts exercise their discretionary powers of management and control of the trust. This was evidenced in the Fundy Settlement where the court applied “the central management and control test” to determine the residency of the trust.
- A Landmark Case For Trust Administrators: Fundy Settlement v Canada
- 6 Main Duties of a Trustee
- Understanding Trustee Duties
- Factors to Consider Before Accepting a Trusteeship
Trustees must always exercise their powers and make decisions in accordance with the terms of the trust. Some decisions may require additional documentation so it is crucial that all trustees are familiar with the Trust Deed and have the Trust Deed made available to them for consideration before a decision is finalised.
Protecting the Integrity of the Trust
In the modern world, many trustees prefer to communicate via email and pass written resolutions rather than convene meetings to meet in person. While many modern trust deeds permit notices and meetings via telecommunications, it is not a real substitute for actually holding a meeting and discussing matters face-to-face.
Professional trustees such as Pearse Trust will always ensure that regular trustee meetings take place to uphold the integrity of your trust and ensure that it is managed efficiently.