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Ways to minimise the liability

Trustees and their liability for losses, risks and taxation debts

By Sue Howe

A prudent trustee who is an efficient manager would also insure the assets that form the trust fund.  There can also be certain particular situations or risks that should be minimised by the trustees. If trustees neglect this part of their duty then they may find themselves liable for losses or damage and beneficiaries of the trust who will hold them accountable.

That is why it is prudent to spend some time considering some areas of risks for the trust and the trustees.

Insurances

It is vital that you review all your insurance needs on an annual basis, you have formed your trust to protect your assets.  Insurance can be seen as an umbrella over your trust making sure you and your assets are protected from the unexpected.

Insuring Your Assets

There are many types of assets held in trust for your family; these include the family home, investment properties, family heirlooms, antiques, motor vehicles etc.,

Part of an annual review will be to ensure you the correct ownership on these items are they insured in the family trust, do you have them insured for the correct value. 

Are You Insured?

You have insured your home, investment properties and antiques etc., Have you also reviewed your liabilities owing against these assets.  There are many types of insurances available to protect you and your investments.

Life Insurance

 

Living Insurance

 

Income Protection

These insurances will help you protect your assets by continuing to provide an income to pay any debts the trust may have. You can also use insurance as a way to provide a lumps sum to be left to your beneficiaries.

6. Formulating policies on trusteeship in specific matters: 

  1. How to deal with the beneficiaries and their claims    Every trust has its own areas of concern and the Memorandum of Wishes and Letters of intent will have to guide the trustees initially and in later years
  2. How to manage trust matters efficiently and in a businesslike manner.  Application of the above points discussed under Running a trust and Yearly review activities.
  3. How to set policies for asset management and investments

1. (The legal aspect has been described above…herewith some practical points for a specific investment such as a mortgage backed security investment  (some comments from Heather Kentsley).



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