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By: Victory Sarah Opawoye

Trust relationships are formed when a trustee is obligated based on equity, to hold property, whether it is real or personal possessions. The essence of this relationship lies in ensuring that the benefits of the property do not accrue to the trustee, but rather to the beneficiaries or other designated individuals or entities.

Trust law is a powerful legal framework that plays a crucial role in safeguarding wealth. By establishing trusts, individuals and businesses can protect their assets, ensure efficient management and secure financial well-being for future generations.

Within a trust, the trustee assumes a position of confidence and is required to act in good faith, upholding the interests of the beneficiaries and safeguarding the trust property. It is crucial that the trustee refrains from engaging in actions that could jeopardize the beneficiaries’ interests.

Trusts exist in various forms and serve diverse purposes, often reflected in their names. Contrary to popular belief, trusts are not exclusively for the wealthy, but can also be established by individuals with limited means for their own benefits or those of others.

In this article we will delve into the significance of trust law and the roles of a trustee by exploring realistic examples that highlight its personal application and the positive impact.

The Okonjo family, a prominent business dynasty in Nigeria, for decades has built a vast empire spanning industries such as oil, real estates and telecommunications. However, as the family grew in size and complexity, concerns arose about the long-term preservation and succession of their wealth.

The Okonjo family sought the expertise of trust lawyers who crafted a comprehensive trust structure to safeguard their assets. By placing their wealth within trust, they created a legally binding arrangement that separated ownership from control. This not only protected their assets from potential risks and disputes but also ensured continuity and stability.

                                            ROLES OF A TRUSTEE

1. Fiduciary Duties: Trustees owe fiduciary duties to the beneficiaries, which encompass the responsibility to manage the trust in the best interests of the beneficiaries. The trustee must make decisions that prioritize the beneficiaries’ well-being, as they hold an equitable title to the property.

2. Duty to Administer Trust Assets: Trustees have the obligation to administer trust assets in accordance with the terms specified in the trust document.

3. Duty of Loyalty: This duty requires trustees to prioritize the interests of the beneficiaries over their personal interests when managing the trust property.

4. Duty to Act in Good Faith: Trustees are obligated to act with honesty and integrity in fulfilling their responsibilities, while being accountable to the beneficiaries.

5. Duty of Skill and Due Diligence: Trustees must exercise reasonable care, prudence, skill, and diligence in the administration of trust assets.

6. Responsibility for Asset Management: Trustees are responsible for managing trust assets with the same caution that a reasonable person would exercise in managing their own assets.

TYPES OF TRUSTS

1. Private Trust: These trusts are typically established for family members, relatives, or specifically identified individuals. In Knight v. Knight (1840) 49 ER 58, it was established that every trust must satisfy three certainties:

  a. Certainty of Intention: The settlor must demonstrate an intent to create a trust, which can be expressed in the arrangement’s terms.

  b. Certainty of Subject Matter: The property held under the trust must be identifiable and specified.

  c. Certainty of Object: The intended beneficiaries of the trust must be recognizable or ascertainable, or the trust will fail.

2. Public or Charitable Trust: These trusts are created for the benefit of the general public, with the beneficiaries not being selected based on personal relationships with the settlor. To qualify as a charitable trust, it must exhibit an element of public benefit. In RE CROMPTON [1945] ch.299, a trust created for the education of specific individuals’ descendants failed the test of public benefit.

LEGAL FRAMEWORK

The provisions of a trust arrangement can be enforced in any court of law when disputes arise.

1. Trustees Act of 1893: This significant legislation provides clarity and guidance to trustees regarding the administration of trusts. It outlines trustees’ responsibilities in managing trust funds properly and empowers them to invest trust funds, sell assets, and manage the trust affairs in the best interests of the beneficiaries. The act allows trustees to delegate certain functions to professionals or agents and provides protection by granting them discharge from liability when they act in accordance with the act’s provisions and the trust’s terms.

2. Trustee Investment Act: This act provides guidelines for trustees on the investment of trust funds, ensuring that they act prudently and in the best interests of the beneficiaries. It specifies permissible investments and criteria for their selection, emphasizing the need for care, skill, and due diligence in investment decision-making.

BENEFITS OF TRUSTEESHIP

1. Asset Protection: Trusts provide a legal structure that safeguards assets for the intended beneficiaries. Placing property in a trust is a common method of asset protection since trusts are not entities in their own right and are not subject to legal actions like individuals or companies.

2. Estate Planning: Individuals can create trusts to facilitate the orderly transfer of assets to their chosen beneficiaries, ensuring smoother succession and reducing potential disputes.

3. Charitable Purposes: Trustees can establish and manage charitable trusts to support various philanthropic causes, promoting social development and welfare.

4. Continuity: Trusteeship can span multiple generations, with appointed trustees overseeing asset administration and distribution over time, fostering stability and long-term planning.

5. Confidentiality: Trusteeship allows for discreet asset management, preserving individuals’ privacy and shielding their financial affairs from public scrutiny.

One of the key benefits of trust law became evident when the Okonjo family faced a sudden economic downturn. Due to careful planning and diversification of their assets through trust, they were able to weather the storm without jeopardizing their core financial security. The trust structure provided them with a resilient foundation to withstand economic challenges and emerge stronger.

Through the appointment of professional trustees, the family was able to tap into specialized expertise with experience in wealth management, investment and estate planning.

A well-structured trust specifies the conditions and gives instructions on the management of the trust property. It also ensures that the settlor’s asset can be preserved, protected from potential misuse while ensuring it is utilized responsibly.

Conclusion

Trusteeship law in Nigeria establishes a framework for the responsible and equitable management of trust assets. By adhering to fiduciary duties, trustees ensure the protection and benefit of the trust’s beneficiaries. Trusts offer numerous advantages, such as asset protection, estate planning facilitation, support for charitable causes, and continuity across generations, and confidentiality. The legal framework governing trusteeship provides guidance and safeguards for trustees, empowering them to carry out their duties effectively and in the best interests of the beneficiaries.

By harnessing the power of trust law, individuals and businesses in Nigeria cam create a solid foundation for long-term financial security and preserve their wealth for future generations.