Jenny and Tim, together with their brother, Bill, were beneficiaries of the trust their parents had set up twenty years ago. Their parents had subsequently died and upon their father’s death, Bill, the eldest child was appointed as a trustee to act alongside the family accountant. The trust owned a commercial property, a couple of residential properties and had some cash in the bank.

For the first few years after their father died, things were okay – Jenny and Tim each received some money from the trust each year which they assumed was income from the various properties. Jenny and Tim didn’t expect that the income to the trust was that much. The interest earned on bank deposits these days was low and they had no idea how much income the properties generated. They were grateful for the wee bonus the trust paid each of them at Christmas each year.

Until one day Jenny was driving past one of the trust’s properties in Forrest Hill and she noticed Bill’s son, Mark, getting into his car. Jenny hadn’t seen Mark for a while and stopped to say hello, wondering what he was doing at the trust’s property. Mark was pleased to see his aunty and told her that he was now living in the trust property with his girlfriend. He said it was great because the rent was really cheap, only $200 per week. Alarm bells went off in Jenny’s head. While she had no idea how much market rent was in the area, she knew that $200 was incredibly cheap for a house in that area. She went home and rang Tim who suggested that they ring the accountant who was the other trustee for the trust.

The accountant was very cagey when Jenny rang him. He told her that he had assumed that Bill was giving Jenny and Tim information about the trust. He said she should really talk to Bill. Instead of ringing Bill, Jenny rang her lawyer. Her lawyer told her that she and Tim were entitled to see the financials to the trust and that she would request them from the accountant.

Two weeks later Jenny and Tim met with Jenny’s lawyer to look at the accounts for the trust. They couldn’t believe their eyes when they saw the amount of income the trust was receiving from the commercial property it owned, and that the amount of money the trust had in the bank was far more than they imagined. They also saw that the amounts which had been paid to Bill and his children over the years far exceeded anything Jenny and Tim had ever received. What could Jenny and Tim do? By favouring himself and his family, Bill was clearly in breach of his trustee duties. Jenny’s lawyer advised Jenny and Tim that if talking to Bill about his failings as a trustee failed, they should make an application to the court to remove Bill and the accountant as trustees and appoint neutral trustees.

Email: Tammy@dhlawyers.co.nz