PAPER Testamentary Trusts Holding Trustees to Account in Discretionary Decision Making
The paper, prepared by Hayley Mitchell of Cooper Grace Ward Lawyers, provides a comprehensive overview of testamentary trusts, focusing on the duties and discretionary powers of trustees. It begins by defining testamentary trusts and distinguishing them from other post‑death trusts, then outlines the essential elements of a trust and the common reasons for using such structures (tax planning, asset protection, etc.). The core of the document details the fiduciary obligations of trustees – preserving and maximising trust property, prudent investment, insurance, good‑faith conduct, impartiality, record‑keeping and the duty to act in accordance with the trust deed. It explains the proper exercise of discretionary powers, the limited requirement to give reasons, and the circumstances under which courts will intervene (bad faith, lack of genuine consideration, improper purpose). Five recent Australian cases (Mandie v Memart Nominees, Baba v Sheehan, Marsella v Wareham, Cardaci v Cardaci, Owies v JJE Nominees) are analysed to illustrate how courts assess trustee discretion, power‑of‑appointment abuse, and trustee removal. The paper concludes with practical drafting considerations, covering beneficiary definitions, inclusion of special disability trusts, related entities, distribution powers, vesting periods, default beneficiaries, variation powers, and appointor/veto powers, emphasizing how precise drafting can prevent disputes. It ends with contact details for further advice.
Topics
Defining Testamentary Trusts and Scope of the Paper
Introduces testamentary trusts, excludes post‑death, superannuation and disability trusts, and sets the focus on trustee discretionary duties.