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NSW Trust Account - Sister Is Trustee

Discussion in 'Wills and Estate Planning Law Forum' started by Herb, 15 September 2014.

  1. Herb

    Herb Member

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    Hi I have the following question : My Sister is the trustee to some money my mother left me when she passed I have asked my sister to pay off my mortgage with the money as it will just cover it and wipe out my debt completely (she says she will agree if I can guarantee that she will not place herself in a legally bad position, I agree) how can I go about this would I sign a statutory declaration that I will not sue her in the future or would I need to have a contract written up to this affect? seems like an awful lot of trouble and wasted money as I would not be taking legal action against her in the future for paying off my home loan, but she "needs a guarantee" and I am sure a statutory declaration would be enough maybe it isn't, hence the question.
     
  2. Paul Cott

    Paul Cott Well-Known Member

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    Herb

    For the sake of caution, I would suggest a contract be drawn up. I have some doubts a stat dec would work in this scenario. Best to be safe than sorry.

    Hope that helps.
     
  3. Sarah J

    Sarah J Well-Known Member

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    Hi Herb,

    You say your mum set up this trust with your sister as trustee and yourself as beneficiary? Was this contained in a Will? If so, has a grant of probate been sought and issued?

    If this account was set up in a will, it is necessary to get a grant of probate before effecting anything in the will (such as paying out trust money) because if it turns out later that this was actually invalid under the will or under the rules of wills and probate, then your sister may be personally liable for any loss incurred.
     
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  4. Herb

    Herb Member

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    Thanks Sarah J, that is good advice, I put this question to you when you say loss how could it be deemed a loss if it pays of my mortgage which benefits me and my family? I will give you a quick run down $60 k is in the trust it makes $1600 a year in interest I owe 61K on my house (by the time it matures again in 5 mths my mortgage will be equal or less to this amount) if we were to pay off my house the money saved by doing this is roughly $9000 a year in mortgage payments it just makes sense to us to just do it, why would this be deemed a loss in any courts eyes? also if it is an invalid move who enforces this? Can the solicitor who wrote the will out just take us to court for doing this? or do they need to be notified by me? (which I certainly wouldn't do as this is my idea in the first place) Thanks again
     
  5. Sarah J

    Sarah J Well-Known Member

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    Hi Herb,

    By loss, I mean, are you absolutely certain that you are the sole beneficiary to this money?

    If your mother's Will was later found invalid, or not the final version, or the particular provision was found invalid, then the source for creating a trust in your favour would be gone. In that case, who the beneficiary is may differ. There may be other people with an interest to your mother's estate who may claim.

    Further, has your mother's funeral expenses, administrative costs, debts and other fees paid off? If not, and there is not enough money to cover this from the residual estate or allocated money, then other assets may need to be sold or used to cover the remaining amount.

    Hence, the "loss" would be your sister indemnifying any money that was used toward something that later turned out to be for an improper use, in the sense that the money should not have been put toward that purpose (mortgage) but really should have gone toward another purpose (shared amongst other beneficiaries or toward paying of debts etc).

    Therefore, it is best to obtain a Grant of Probate so that you have certainty that the Will is correct and valid. An executor generally should not be dealing with gifts under a Will unless a grant of probate has been issued.
     
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  6. Herb

    Herb Member

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    ok,Sarah you seem to know what you are talking about here are some fun facts, all the money has been distributed from the will to all recipients and all costings paid out as it was four years ago she died, the trust is(my "share" of the will) purely for helping me to fund my children's schooling expenses until my youngest turns 18 then the money is to be released to me ( however at the time of writing the will my Mother could not have foreseen that my partner (mother of all my 4 children ) has since left me and all the kids (3 mths after mum died) so I am now a single parent, my sister agrees (as she is an accountant and the trustee) that paying off my mortgage is by far the best option as the money the trust makes is a mere trickle at 1600 a year versus 9000 a year that paying off my mortgage will save me (that"s a hell of a lot of school funding in my eyes) but I am simply trying to find out what option's we have if any for her to do this as she and I do not want any legal action to go against her this is why I want to know "who" if anyone could want to take her to court if she does pay off my mortgage it certainly won't be me or is this simply a matter of just do it. Thanks again for your insightful replies
     
  7. Sarah J

    Sarah J Well-Known Member

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    Hi Herb,

    If you believe there is no risk of objection then practically speaking, you should be okay to use the fund toward your mortgage.

    I would suggest taking a closer look at the trust created by your mother and making sure that it is not a fund for a particular and sole purpose and that it is possible to change the purpose (i.e. application) of the trust money depending on changing circumstances. However, this would only be an issue if there was anyone to object, as you said. Your children may be too young to understand this, but given that they are co-beneficiaries in the trust, perhaps speaking to them about this would be a good idea? Legally, your children has a right to object in the future, but again, this shouldn't be a problem if you are able to cover their schooling expenses in the future.
     

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