MEET THE FAMILY TRUST EXPERTS
Annual Trustee Meetings: Explained
Hello Readers
I hope you’ve enjoyed your Christmas break and are now fully rested, ready to tackle the New Year.
Usually most of us have some spare time at the beginning of a new year and I recommend some of this time being used by Trustees to conduct an Annual Trustee Meeting (”ATM”).
An ATM is our way of of taking care of your Family Trust to protect you, your family and your future.
So what exactly is this and how does it help the Trust?
Well, Trustees have a duty at law to annual review the affairs of the Trust so by holding this Meeting they are satisfying their duty. Additionally, this meeting will go a considerable way to ensuring the successful operation of the Trust and can be instrumental in avoiding a Trust failure.
The Value of an ATM
To demonstrate how an ATM can help a Trust, let’s take the example of Mr and Mrs Boiler. They were the Trustees of the Boiler Family Trust which contained the following assets:
* Family home;
* Shares in Boiler Orchard Limited; and
* $47,000 in cash on term deposit.
When I looked at this Family Trust it initially appeared to be in good health. But it soon became apparent when reviewing the financial statements and talking to the Trustees that the assets of the Trust were under threat. You see the liabilities of the Trust had increased in the last two years. I wanted to know why that was.
The Trustees told me that the Trust’s orchard business had done well over the years but in the preceding two years a large supermarket had come to town. When this occurred, the town’s population purchased all the goods they needed from the supermarket. T
This meant the produce the orchard produced wasn’t selling and what was selling had to be sold at a heavily discounted price. As a result, the Trust had suffered losses in the last two years and had to increase its Bank borrowings just to serve debt.
I was not the Professional Trustee of this Trust but Mr and Mrs Boiler had come to me for advice. I immediately recommended the orchard be sold. It was a case of selling in an orderly fashion or in another year, having the Bank foreclose and sell. The latter option was not attractive. A sale proceeded and financial disaster was avoided.
Family Trust Lessons
What’s interesting about this case is if this Trust had a Professional Trustee who had conducted with their co-Trustees an ATM, two things would have been identified.
First, the news that the supermarket was arriving in town would have been aired.
Secondly, the Professional Trustee would have considered this broadcast and discussed the need to sell the orchard business. The Professional Trustee would have given this advice because it would have been clear what was going to happen.
Hopefully, all Trustees would have agreed to sell the business and the need to increase debt would have been avoided. Overall, the Trust would not have suffered the loss it did as the Trustees could have taken action much sooner than what they did.
I hope you can see from the above example the value in holding an ATM.
ATM Checklist
At the Meeting several points should be addressed. These are as follows:
- Trustees should identify and discuss the objectives of the Trust and determine whether those objectives should be carried on in the forthcoming year;
- A schedule of assets and liabilities of the Trust should be completed and analyzed. Trustees should in particular discuss how well the investments are performing and how comfortable they are with the level of debt the Trust is carrying or exposed to.
- Trustees should check the assets of the Trust are well maintained and if maintenance is necessary, should make a list of what is required and who will be instructed to carry out maintenance out.
- All insurance policies for the assets of the Trust should be checked to ensure insurance cover is adequate. Policies must be checked that they are held in the A report by the Professional Trustee and the findings of the Financial Statement Review they have undertaken, should be given to all other Trustees.
The above list of points is not exhaustive but merely suggestive. This is because the matters discussed at each Trust’s ATM may differ depending upon the nature and objectives of the Trust.
Lastly and most importantly, once the ATM has been completed, the Minutes of the ATM should be prepared and signed by all Trustees.
Those Minutes should contain the decision the Trustees have unanimously made regarding whether or not to retain the current assets of the Trust given the nature of those particular assets and taking into account the objectives the Trustees have. In my experience, this task is best carried out by the Professional Trustee.
I hope this information spurs you on to holding an ATM. As always, if you have any queries, would like a review of your Trust or need help, just contact us.
A review of your Trust and structures may end up saving you money and a lot of heart-ache. We work by phone, email or skype for your convenience.
Best wishes for the New Year.
Janet Xuccoa BCom LLB
Professional Trustee Services
Gilligan Rowe + Associates Ltd
Chartered Accountants
Learn more about Janet
Email: jx@gra.co.nz
Ph: +64 9 522 7955
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Family Trust Experts
Matthew Gilligan, CPA
Matthew Gilligan is a Chartered Accountant and has been practising for 16 years as a Director of Gilligan Rowe & Associates Limited (“GRA”), the Family Trust experts. He began the practice in 1992 and it has grown exponentially in staff and services offered from its inception. His co-Directors are John Rowe and Janet Xuccoa.
GRA is a Chartered Accounting practice, specializing in property and tax structures, business consultancy and advisory services, and preparation of financial accounting information for individual clients, family and owner managed businesses and company clients. The firm also offers a complete range of traditional chartered accountancy services.
Matthew’s Division specializes in an asset planning process which involves designing asset ownership structures to deal with protecting assets, estate planning and tax minimization goals collectively. Matthew has been involved in asset planning and property market for over 16 years.
Matthew is a well known speaker on asset planning and property matters. He presents annually at Thrive Auckland and Thrive Waikato. He also speaks to various Property Investor Association groups, Chambers of Commerce, Retailers Associations, Builders Association amongst other groups in society.
Contact Matthew:
matthew@familytrusts.co.nz
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Janet Xuccoa, BCom LLB
Janet is a director and shareholder in Gilligan Rowe & Associates Ltd. She holds an accounting degree and a law degree and has gained much knowledge and experience from working in New Zealand law and accounting firms.
Janet is a well known author on trustee matters and has written numerous articles for different publications including the New Zealand Property magazine. Currently, she writes for Business to Business Newspaper, Essentially Home Magazine, Mothers On Line and Squirrel. She is also completing a book with Matthew Gilligan and John Rowe which is intended to be published 2009.
Janet is a renowned speaker and presents at seminars held by Property Groups, Chambers of Commerce, Retailers Associations, Women’s Groups, Banking Institutions, Home Shows, Mortgage Brokers and Management Organisations. She has also presented at Thrive Auckland and Thrive Wellington, the biggest business events held in New Zealand.
At Gilligan Rowe & Associates Ltd Janet leads the Professional Trustee and Estate Planning division, assisting Trustees and Directors to comply with their duties, ensuring Trusts and Companies are operated efficiently and lawfully. She is also responsible for marketing within the firm.
Through the expertise Janet possesses, she is able to assist clients develop and maintain effective structures to purchase property, conduct business activities and protect their assets.
Contact Janet:
janet@familytrusts.co.nz
_______________________________________________________________
More Information?
If you have any questions or queries relating to asset protection or trusts you can Request-A-Call for a no-risk chat or to set up an interview. Otherwise just call Janet Xuccoa, Trust Director Family Trust expert and Partner of Gilligan Rowe & Associates Limited. Janet can be contacted by emailing janet@familytrusts.co.nz or telephoning (09) 522 7955.
