Trustee Minutes & Trustee Resolutions, What's The Deal?
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Articles by The Professional Trustee Team
As a professional trustee, I'm often asked two questions. First, what's the difference between trustee minutes and trustee resolutions and secondly, why are they so important?
To answer the first question first, trustee minutes are really notes made of a meeting of trustees and the decisions those trustees make at their meeting. Trustee resolutions on the other hand, are a record of what the trustees have decided to do but they are made when a physical meeting of trustees has not occurred. For example, where trustees have discussed matters and made decisions by telephone rather than having a physical meeting.
Why are trustee minutes and resolutions so important? To answer this question, you have to go back to old English law.
Parliament has decreed that assets held in a trust are held for the beneficiaries of the particular trust in question and, all things being equal, are generally protected. To obtain that protection however, trustees have to satisfy a few duties.
One duty trustees have is to document the decisions they make in an appropriate manner. So what does this entail?
I believe it means trustees have to show they have taken into account all relevant, factual matters before they have actually made their decisions.
Duty in action
An example of this in action is where a property is going to be acquired by a discretionary trust.
The trustees should at the very minimum ask themselves what the assets and the liabilities of the trust are before the purchase and what they will be after the house purchase has been completed. Ratios should be compiled. Trustees will also want to understand how any loans that are going to be picked up will be satisfied. Which of course leads trustees to reading and considering the loan contracts that are being placed before them. Finally, a question which I think most important is to ask how is the house purchase going to benefit the beneficiaries? After all, the trust is created for the beneficiaries so it's vital their interests are being served by the transaction.
Once all the above has been asked and answered, it's imperative to demonstrate the trustees have met their duty, and so trustee minutes or trustee resolutions have to be prepared and signed. Of course, these minutes and resolutions should be backed up with appropriate evidence that trustees have considered all the relevant factual matters that we've just discussed.
Not all trusts have the benefit of a professional trustee so not all trustees understand how vital the above is as the trustees in a fairly recent case found out. The consequences in that case were dire. Trustees were found to be in breach of their duties and their decisions were set aside.
Summary
Moral of the story for all trustees is satisfy the 3D Rule: Gather relevant information together before you make your decisions, distribute that information and discuss its contents and implications amongst yourselves as trustees, and then document your decisions in appropriate trustee minutes or trustee resolutions. Only this way can you demonstrate that you have met your duties and thus keep the trust's assets protected.
If you need any assistance with this, please just let the Professional Trustee team know. We are always happy to help our clients and a quick discussion over the telephone can frequently save much heartache, time and money down the track.
The Professional Trustee Team
© Gilligan Rowe & Associates LP
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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
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Thanks Janet. I also want to say thank you so much for your books. I started reading Money Secrets last night - I have been wondering why I just haven't been dealing with stuff and been so stuck lately and your writing is bringing some clarity. So I will be shaking off the Rabbit ears and Ostrich feathers! -- and giving copies of the book to my nephew and niece. Cheers, Sue - Sue Pickernell-Crow, October 2018
Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.
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