Do Trusts Need an Appointor?
This article will guide you through the role of an appointor as well as discussing circumstances where appointors can be very useful.
What is an appointor?
An appointor, also known as the Principal or Guardian, is the ultimate controller of a trust. They may be directly related to the trust, such as a named beneficiary. They may also be existing trustees or a third party. Alternatively, a trust may have an ‘independent’ appointor. This is usually a professional, such as an accountant, to lower the risk of certain individuals controlling the trust.
What is the role of an appointor?
The main role of an appointor is their ability to assign and remove the trustees. This can provide a smooth and efficient way to replace trustees who are unable to or fail to meet their obligations.
The appointor may be provided with further protective powers. For example, the trustee may require their consent before they add or exclude specific beneficiaries, or vary the deed itself. They may also oversee the trustee to ensure they act in compliance with their obligations. By controlling who acts as trustee, as well as how they exercise their role, the appointor is generally seen as the most definitive party in the trust.
Do Trusts require an appointor?
Wondering whether your trust needs an appointor is a commonly asked question. However, the answer depends on the specific circumstances surrounding your trust. When a discretionary trust is established, parties need to consider whether they need an appointor, what powers they should have, and who it should be. It is not essential that your trust has an appointor. In fact, many trusts don’t have an appointer. However, the power to block certain actions as well as remove and replace trustees makes this a popular option for family trusts.
There are certain circumstances where having an appointor ensures certain administrative issues can be resolved relatively quickly. Specifically, by removing and appointing trustees where necessary. For example, in scenarios involving the death or insolvency of a trustee, having someone able to appoint new trustees prevents unnecessary confusion and delay. Alternatively, where the trustee is unable to act or is acting in an unsatisfactory manner, providing an appointor the power to remove and replace the trustee can save time and effort in resolving such issues. If you want your trust to have an appointer, this needs to be set out in your trust deed. Further, you should also include provisions regarding who will succeed the appointer if they pass away.
Because of the exclusive powers provided to the appointor, they are seen as the ultimate controller of the trust. Therefore, it is important you are aware of their role and their powers before considering who you appoint. If you have any doubts as to what your trust says, it is recommended that you get in touch with a trust lawyer.
James is a Legal Tech Intern at Lawpath. He is currently studying a Bachelor of Laws and a Bachelor of Business, majoring in Finance at the University of Technology Sydney.