Lou & Thelma

Lou and Thelma were in their early 60s and had just celebrated the arrival of their first grandchild. Their family was close and supportive and they were financially well-off having recently sold the family farm in Matamata to move to Auckland to be near their son Paul and daughter Samantha. They also had a family trust which they established 25 years ago to own the farm and an investment trust which held their fixed term deposits and shareholdings. The trusts had served them well but they thought it was time to meet with a solicitor to see whether the trusts were still needed now that they no longer owned the farm and shareholdings. Once they were settled in their new home in Auckland, they set up a meeting with a local solicitor who was referred to them by their friendly neighbour. Fortunately, the solicitor Bob was a specialist in trust law.
Bob advised Lou and Thelma they no longer needed two trusts and that all their assets could now be held in one trust. As the family trust owned the property, Bob suggested it would be simpler to move the fixed term deposits into the family trust and wind up the investment trust. Lou and Thelma thought this was a great idea as it would save them the extra costs with running a second trust.
Since Lou and Thelma would be keeping the family trust, Bob also carried out a review of the trust deed taking into account the provisions of the new Trusts Act. He could see that the deed contained provisions which were now outdated due to the recent law changes, that it was missing clauses which would give the trustees vital protection if the trust was ever challenged and, more importantly, it did not provide for who is to hold the power of appointment of trustees if either Lou or Thelma lost capacity.
Further, Lou and Thelma didn’t have a memorandum of guidance or letter of wishes. They hadn’t even heard of those terms, but soon learned that these were instructions to the trustees as to how they wished the trust assets to be dealt with if one or both of them died – like a will for the trust.
Fortunately for Lou and Thelma, the trust deed did allow for its terms to be varied, so most of the things that were wrong could be fixed. Because Bob specialised in trusts, he also had a trustee company which Lou and Thelma appointed as their independent trustee. Lou and Thelma were relieved that their affairs could be tidied up and were grateful they had taken specialist trust advice.

Issue 105 December 2019