What happens if I choose a family member to be my trustee?
A trustee’s power and control over your assets and his/her power to make distributions can cause resentment among beneficiaries. Hurt feelings may develop in those family members not chosen, who may feel dismissed or feel that the settlor believes them to be unworthy of trust and respect.
Can a creditor take assets from a family trust?
A family trust also offers some degree of protection for your personal assets. In most cases, a creditor cannot take a trustee’s personal assets in the event of bankruptcy. Likewise, creditors cannot take assets held by a company trustee in the event of that company’s liquidation, subject to some exceptions.
How is a settlor involved in a family trust?
The settlor only has a role in the setup stage of the trust. To form a family trust, a settlor needs to give assets or a sum of money to the trustee and sign the trust deed. Once the trust has been set up, the settlor will have no ongoing involvement in the trust. For tax reasons, the settlor should be someone with no other connection to the trust.
Who are the beneficiaries of a family trust?
They will be entitled to receive the trust’s income and capital gains if the trustee nominates them in a given financial year. Unlike the trustee, beneficiaries do not have control of the trust. You can name the primary beneficiaries of your trust and also nominate unnamed beneficiaries.
Can a sibling serve as a trust trustee?
While in some situations it is appropriate for a sibling or other family member to serve as trustee, in many cases, particularly with a larger trust, naming a family member is not the best decision, for several reasons. First, clients fail to appreciate the amount of work involved in being a good trustee.
When does a family member serve as trustee?
When a Family Member Serves as Trustee – “Fair and Honest Is Not Enough”. Parents typically face two choices when selecting a trustee to manage a special needs trust for their child when the parents have died. One choice is a professional trustee–a bank or trust company or an individual who is in the business of serving as a trustee.
Can a bad trustee refuse to make distributions?
Having a bad trustee who refuses to make distributions as required by the trust document is not unusual—it happens more often than you might think. Luckily, in this case Brian is supposed to receive an outright distribution of one-half of the trust estate. There are no restrictions or trusts created for Brian; it is an outright gift.
What happens when a family member is betrayed?
The psychological trauma is impossible to quantify: In addition to experiencing a number of disturbing feelings, the honest family members may not have the ability to trust anyone for some time. Feelings of denial, followed by anger, are typical.