Addressing Control of Family Trust

Monday, June 29th, 2009

When you own your own business, there are many things to think of.  Often, ensuring that your personal, business, and financial affairs are in order in case of your death takes low priority.  But if you don’t address this issue, your business ownership may pass on to the wrong people.  “And if you have young or handicapped children, you may want to ensure that their future is financially secure,” writes Max Newnham.

Nowadays, there’s a lot of confusion on how discretionary trust affects one estate.  Also, a person who controls the family trust just because they’re the trustee can’t deal with the trust assets through their will.  Moreover, if the business is owned by trust, the business control is not affected by a person’s will.

There’s common misconception that all power belongs to the trustee.  However, the true power lies in the person called the appointer.  Sure, the day-to-day control of trust is given to a trustee; however, the appointer can remove and appoint a new trustee.

In other words, business owners who bequeath shares in their trustee companies may mistakenly believe that they’ve chosen the person they want to have control of the business.  Normally, the business owner will also be the appointer; but when they pass away, it’s their personal legal representative - which is often the executor - who assumes this power.  So even if the executor is not one of the shareholders in the trustee company, they can still assume business control by appointing themselves and removing your assigned trustee.

Tags: appointer, business, discretionary trust, estate, executor, Family Trust, financial, Max Newnham, ownership, trustee, will
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