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Who can be an Independent Trustee and what is an Appointor ? What is a SHAM Trust ?

You can appoint yourself as a normal Trustee ( the Settlor-Trustee).

A Trust can also have another type of trustee, and it is usually someone who is not a member of your family ( The Independent Trustee). We believe you should define such a Trustee  in your trust documents.  All bank documents relating to loans ,taken out by the Trust or when  Trustees give security for loans to others, will mention an independent Trustee. For the bank's purposes such a trustee must not be a member of the Settlor's family ,who can benefit, or else they will not be indemnified if loans are not repaid.  An Independent Trustee will act with you, and provide the objectivity, which is required for Trustee decisions, if your trust decisions are ever questioned or scrutinized by others. They can thus bring greater protection to the Assets of the Family Trust.

Most people who set up Family Trusts are simply concerned Parents or Asset owners who want to safeguard their Assets. They do not want to rip off the system or cheat their Creditors. If they have tax benefits that's fine, but it's certainly not their primary objective. For them an independent trustee is usually not required to run their Trust! They view it as a hindrance when they are buying and selling Trust property or when they take out loans. An Independent Trustee  will usually have a different opinion on particular transactions than the Settlor-Trustees. Dealing with that may consume much time and money. Their opinions are not always better for the Trust or for the family of the Settlor. Many professional Trustees will operate from a safe basis, and are reluctant to take any risks that may make them personally liable. That is understandable, but it may not suit you as the Settlor-Trustee of such a Family Trust.

Many clients decide to set up a Trust and to run it themselves. They can do that personally (in Family Trusts) or they can do so through a Company (in Trading Trusts). Often an additional person called the Appointor, who is not a Trustee, rules in matters of trustee appointments thus providing a degree of objectivity.

Trustees who run their Trust on their own should especially  be acting as prudent Trustees! It makes a yearly review of their activities of vital importance. Prudent Trustees record their decisions and show that their actions benefit the Trust or the named Beneficiaries. On the other hand, Trustees who run their Trust , without regard for other Beneficiaries or without some simple form of administration for their Trust, can be accused of running a 'Sham' Trust. They could lose their tax benefits and protection against Creditors, if their Trust ever comes under scrutiny. In fact, our Welfare Department may even disregard a Trust , and deny a State Subsidy. They can do that, when it is clear to them, that an Applicant for a subsidy, is controlling his or her Trust beyond accepted norms for  typical Trustees.  Their justification would be to maintain, that such Trustees have retained control of the Income and Assets of the Trust Fund. They could then decide to deny any application for a subsidy by such Trustees.

We therefore recommend a Review visit to our specialist TrustLaw practice once a year, and we will ensure that your trust affairs are in order.

Contact us to discuss your family trust requirements.
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