A good boss
Gina Goodwin ran a small successful business in Christchurch for many years.
Gina passed away in May 2012 and Grey Guardians, a trustee company, was appointed executor and trustee of Gina’s Estate. Gina had no surviving family and left her estate to her three former employees, Garry, Glen and Greg in equal shares.
Gina owned her home and a commercial building from which she ran her business. Both Gina’s home and the commercial building had been damaged in the Christchurch earthquakes. When Gina passed away, she had several claims pending with her insurer that had not been paid out. Gina’s estate comprised her home, the commercial building, the unpaid insurance claims, her car and some savings.
Garry had administered his own Christchurch earthquake claims through EQC and the insurers and assisted Grey Guardians in administering Gina’s outstanding insurance claims. Garry’s efforts saw approximately $12,000 of claims paid that may not otherwise have been recovered.
As trustee, Grey Guardians sold Gina’s home after short negotiations with the purchaser. Garry, Glen and Greg were told of the impending sale and the price. On payment of the purchase price Grey Guardians assigned all the insurance claims associated with Gina’s home to the new purchaser. Garry, Glen and Greg were upset as they believed that Gina’s home was sold ‘as is where is’ and that the sale price did not include the unpaid insurance claims.
After the sale, Garry, Glen and Greg became concerned that Grey Guardians was not listening to them and acting in their best interests.
Grey Guardians had decided to sell Gina’s commercial building. The sale was likely to attract a GST payment as the business was no longer trading. Garry, Glen and Greg did not want to sell the commercial building and were interested in owning the building in equal shares. They wanted to understand the amount of any tax liability and whether they may be able to have the sale or transfer ‘zero-rated’ before Grey Guardians sold the building.
The Complaint
Garry, Glen and Greg complained that Grey Guardians:
– sold the insurance policies with Gina’s home without factoring in their value
– failed to obtain their consent to Gina’s homes sale price and other conditions
– failed to secure the best sale price for Gina’s home
– failed to provide a breakdown of its fees to Garry, Glen and Greg
– failed to provide statement of accounts for the Gina’s estate
– failed to transfer the commercial building to Garry, Glen and Greg.
Outcome
FSCL investigated the complaint and Grey Guardians, Garry, Glen and Greg agreed to attend conciliation.
Garry, Glen and Greg accepted that Grey Guardians acted reasonably in selling Gina’s home with the insurance policies and that the sale price was reasonable. Grey Guardians agreed that it would not charge any further fees to the estate for its service and agreed to reimburse $5000 of estate administration fees it had charged to Gina’s estate.
Concerning the commercial building, Grey Guardians agreed to fund an opinion from a tax professional about the potential tax burden in owning or selling Gina’s commercial building. It was also agreed that Grey Guardians would:
- wind up the trust within a year, and
- provide a completed statement of accounts for Gina’s estate once it had been completed by Grey Guardians’ accountant.
Lesson
Trustees have the authority to manage the trust and to take all reasonable actions in carrying out prudent management such as selling assets, making investments or in making distributions from the trust. Professional trustees and trustee companies charge management fees to the trust for their custodial services and disclose these fees in the trust statement.
Trustees owe fiduciary duties to manage the trust and its assets in a way that best meets the trust’s objectives and benefits the beneficiaries. Beneficiaries can ask trustees about their fees and processes and why trustees have taken certain actions.
