When completing an instruction form for arranging a new family trust for a client, it is very likely that the form will ask the question – Who do you want to be the “Appointor” of the trust?
It’s a very important question, because typically the appointor is the person who has the power to “hire and fire” the trustee of the trust. So even though the trustee is the person (or entity) which holds the legal title to all the assets of the trust and is the person who typically has full management and control over the affairs of the trust, ultimately if the appointor believes that the trustee is not doing their job properly (or for that matter, any other reason) the appointor has the power to remove that person and replace them with one or more new trustees.
More often than not, the appointor will also have additional “powers”, such as the ability to veto certain actions by the trustee (who may be required to provide prior notice of certain intended actions to the appointor). This may extend to important issues such as:
- Amending the trust deed;
- Changing the vesting date (or end date) of the trust; and
- Changing the beneficiaries of the trust.
Given that the appointor often has the power to block certain actions by the trustee and has the power to remove and replace the trustee, the role is often seen as a protective one to prevent excesses and abuses of power by the trustee. Indeed, the role of appointor is often described in trust deeds as “the protector” or “the guardian”.
However, the appointor is also often considered to be the “real power” behind the trust, the one who is pulling the strings of the puppet that is the trustee. Viewed in this light, the role seems less benevolent.
Rather than being a “guardian angel” to watch over the affairs of the trust, the appointor is now more often considered to be the ultimate controller of the trust, and even the “prime mover” of the family behind the establishment and ongoing management of the trust.
As a result, in many modern (and it must be said, “cheap and nasty”) family trust deeds available from certain document providers, the beneficiaries of the trust are even defined around and by reference to the appointor (so that the beneficiaries are literally defined to be the appointor, the appointor’s spouse, the appointor’s children, and so forth).
The so-called “benefit” of this approach is that the document provider typically only needs three names with which to completely populate a template for a family trust deed – the name of the settlor, the name of the trustee, and the name of the appointor.
Unfortunately for the client, the potential downsides of this approach can be severe – especially where the adviser who orders such a family trust deed is not aware that the trust deed is drafted in this manner.
Media enquiries:
Brian Hor
Special Counsel
Superannuation & Estate Planning
SUPERCentral
t: (02) 8296 6222
Level 9, 65 York St, Sydney NSW 2000
Twitter: @SUPERCentralAU
brian@townsendslaw.com.au
www.townsendslaw.com.au