How To Transfer a Trust Book: A 12-Point Guide For Lawyers

How To Transfer a Trust Book: A 12-Point Guide For Lawyers 2
How To Transfer a Trust Book: A 12-Point Guide For Lawyers 3
John McFetridge

John McFetridge, GM Personal Client Services, Perpetual Guardian

Whether for succession planning, risk mitigation or other reasons, swelling numbers of professional services providers – chiefly lawyers and accountants – are seeking to divest themselves of their trusteeships and trust books generally.

Building a number of trusts and trusteeships might have been decades in the making and representative of long-standing relationships between lawyers and clients, so they must be placed carefully in the right hands.

If you have already made the decision to move out of trustee services, or are just starting to consider it, read on for practical, expert advice on what to ask yourself.

  1. Why am I a trustee? Do I want or need this role?

There are several common reasons and all are valid. It’s up to you to decide whether, under the current legislative framework, your reasons are strong enough for you to continue.

If the client asked or expected you to be a trustee, or the trust was set up on your advice, those may be compelling factors. If you’re unsure how the client will react to you retiring as a trustee, a conversation is warranted – and you may need to explain that the obligations and risks of being a trustee have changed.

Health and safety regulations and the personal impact on trustees and directors of nominee trust companies need to be carefully considered and the ramifications explained to clients.

  1. Do I have a plan and systems in place to manage my trustee risks and responsibilities?

The courts have observed and ruled that there is no such thing as a ‘passive trustee’, and professional trustees now face additional responsibilities. A professional trustee is expected to play a strong role, if not the lead role, in governance, and adequate systems are essential.

Ask yourself: In these circumstances, who is my client? How do I maximise advantage and value for my client

If everything is not as it should be in your own practice and you are not prepared to invest accordingly, it may be time to plan an exit from this part of the business.

  1. Am I conflicted in being an adviser and a trustee and in my differing professional dealings with beneficiaries?

In the new regulatory environment, conflicts are commonplace. A trustee has responsibilities and obligations to all beneficiaries – but you may be acting as a legal adviser to only some of them.

Ask yourself: In these circumstances, who is my client? How do I maximise advantage and value for my client?

  1. Does my professional indemnity (PI) insurance cover the risk of my trustee services? What is my risk cover post-retirement?

Your PI is only applicable in specific circumstances. Current PI policies can provide cover under the definition of “professional business” to include the position of trustee.

However, it is usually a condition of cover that all fees accruing from these trustee positions form part of the fee income of the firm and are declared to the insurer at each renewal, at which time a list of trusteeships is also typically required by the insurer.

The policy will exclude cover for any trusteeship appointment for a related or associated entity, i.e. a family member or a trust operated or controlled by a firm member or family member.

The policy is unlikely to cover any trading trusts for debts, insolvency, receivership and the like. The exclusion of these factors presents a risk if all trustees who are not actively involved.

It is important to note that PI cover only applies to the partner/employee who is acting as trustee, not to any other trustees. It only applies in excess of any indemnity provided from the trust. This means the trust assets can be utilised to satisfy the indemnity, resulting in a reduction in value of the assets and potentially disenchanted beneficiaries.

Any claim against a trustee will be recorded against the firm’s PI policy. Therefore, the policy’s claims history may be jeopardised by the actions of others independent of the firm (joint and several liability). Run-off cover should be investigated with your PI provider to ascertain whether, during your retirement, you are covered for the time you acted as trustee.

  1. Who is Perpetual Guardian and why is it suited to the trustee role?

Our business comprises trustee specialists with national representation and a compliance focus, all regulated by the FMA. The original statutory businesses of Perpetual Guardian were established in the 1880s, and we now have $150 billion under corporate and personal client trustee structures and the largest trusteeship in the New Zealand charitable sector.

  1. What due diligence does the incoming trustee undertake?

The incoming trustee should satisfy themselves as to CDD (Customer Due Diligence) and AML/CFT (Anti-Money Laundering and Countering Financing of Terrorism) requirements, and gain an understanding of the trust’s assets and activities, the parties to the trust and their objectives, and how the trust has been run to date.

  1. What warranties and indemnities are sought from the retiring trustee?

This should be considered on a case-by-case basis. As incoming trustee, Perpetual Guardian can accommodate trustees who wish to depart with no, or little, ongoing involvement.

We can also assist those trustees who wish to remain part of the process. (Note that retirement ‘packages’ are affected by the extent to which the retiring trustee backs their previous work.)

  1. What costs do my clients face if I retire as trustee?

Change of trustee documentation costs and external expenses relating to change of property title and bank securities are inevitable. Perpetual Guardian has on-boarding packages that aim to subsidise those costs and reduce them where possible. Again, the options can be reviewed on a case-by-case basis.

  1. What are the ongoing costs for my clients? What difference will my clients notice? Do they stand to get more value?

Perpetual Guardian’s standard annual fee runs at $575, which covers the annual meeting, minutes and resolutions. Attendances are at around $300 an hour for specific actions or transactions.

Our service is a specialist, focused trustee service that is designed to be proactive and supportive of client-driven actions while taking the lead on governance.

  1. How are my clients engaged with during this process?

Active client engagement is at the heart of the process. We meet clients with you and describe our service and answer their questions.

The relationship works best if your clients get to know us and we get to know them and their priorities. An on-boarding plan is mapped out and the client is kept informed and guided through the process. The goal is to make it easy, not onerous.

  1. Will I remain a service provider to trust clients?

Our starting position is to work with all existing service providers. Quality providers who give value for money tend to remain. Clients usually appreciate your ongoing involvement, and being prepared to act as an advisory trustee during a transition period can be looked at favourably by clients who see you are still involved (with the benefit of your risks and responsibilities being greatly reduced).

  1. How does retiring as a trustee assist my personal succession plan?

It’s a great succession move. The trustee retirement process across a large number of trusts can take many years and is ideally not left until your last few years in practice. Consideration for the annuity value of trustee services can be negotiated.

Our advice is to plan ahead and depart when you want to, not when you have to. An incoming business owner may not want to take on your trustee responsibilities, or may not be prepared to pay for them.

With the right information, lawyers can reduce risk while retaining opportunity. For more information, visit to download our white paper.

John McFetridge is Perpetual Guardian’s General Manager, Personal Client Services. He has more than 25 years’ experience in the trustee and financial services industry and is a former MD of Perpetual Trust and former Chair of the Personal Trust and Advisory Services Committee with the Trustee Corporations Association.

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