When Deb’s mother Dianne died, her will transferred her assets to a resultant family trust (the trust) with Deb and a professional trustee company as co-trustees to manage the trust’s assets.
Dianne’s will had been drafted 20 years earlier, with the intention the trust would provide for her husband and her siblings, all of whom had pre-deceased her. The only surviving trust beneficiaries were Deb and her sister Karen.
Deb and Karen felt the trust was now unnecessary. Deb emailed the trustee company advising their wishes that the trust should be wound up and the assets distributed evenly between her and Karen.
After a month with no response, Deb sent a follow up email. It was another full month before the trustee company responded, saying it would start the distribution process, however it would take some time to progress.
Deb asked the trustee company why it would take time to progress and was told that the trustee company would need to take legal advice on whether the distribution would create any tax burden for Deb and Karen, as well as take time to notify the banks for the term deposits’ maturity dates and finalise trust accounts.
Deb felt this should only take another few weeks, but after another month and no update from the trustee company, Deb complained to FSCL.
Deb’s view
Deb considered that the trustee company had been inefficient and had unreasonably delayed distributing the trust. Deb felt that because the trust’s assets were liquid, it should be relatively straight forward to complete distribution.
Neither Deb or Karen were concerned about their tax burden and would pay whatever fair assessment of tax they had to.
Deb felt that the trustee company’s delay caused her unnecessary stress, and that the trust’s funds had not gained interest while invested in the trustee company’s defensive fund, when they could have been re-invested short term with a commercial bank at a higher interest rate.
The trustee company’s view
The trustee company agreed the delays were not Deb’s fault and were not reasonable in the circumstances.
The trustee company had been undergoing a great deal of internal change including new computer systems. The trust’s appointed manager had gone on extended leave and, although her emails were monitored, Deb’s email concerning distribution had been missed.
The trustee company could not produce a trust statement for a few weeks given a staffing shortage and a substantial accounting backlog. The trustee’s normal process was to seek legal advice around any potential tax liability for beneficiaries, but this would also take time.
The trustee company was not sure how best to respond to Deb’s complaint and how to resolve the issues for Deb and Karen.
Review
We reviewed the trustee company’s administration of the trust including the detailed trust statements. At the time Deb sent her email to the trustee company, the trust had approximately $1.2 million invested.
We felt the trustee company had done a reasonable job of administering the estate, however we felt that the delays in distribution were not reasonable and that there should have been more frequent communication with the beneficiaries.
The trustee could have explained the time delays and recorded in writing the beneficiaries’ willingness to forego legal advice.
We felt that the trustee company should have either taken immediate steps to wind up the trust or invested the funds for 3 months so that the beneficiaries did not miss out on any interest while the trustee company took time to finalise the distribution.
We asked the trustee company to consider making a reasonable settlement offer to Deb and Karen, compensating them for interest they had not earned due to the trustee company’s unreasonable delay.
Outcome
The trustee company made a settlement offer of $8,000 to Deb and Karen which they accepted.
Key insights
Sometime there are mistakes or delays that occur as a result of overlooking something, without it being an intentional fault. FSCL can help parties resolve problems by agreement. FSCL can suggest ideas and help parties generate their own options to resolve complaints in a way that’s best for each of them.
