What a trust is
A trust exists where one person — the trustee — holds property that legally belongs to them, but which they must use for the benefit of somebody else, the beneficiary. The trustee’s own creditors cannot touch it. The trustee cannot spend it on themselves. They must account for it.
That is the whole idea, and it is why the office covered in this series was renamed from Public Curator to Public Trustee: the word names the duty.
Trusts for children
The commonest situation is a child inheriting money. A seven-year-old cannot give a valid receipt, manage a bank account or sue if the money disappears, so the law puts the money in a trustee’s hands until the child is old enough.
Section 7 of the Public Curator Act (Chapter 81) provides the machinery. An executor — which here includes an administrator and a trustee — may:
- pay a legacy or share due to an infant to the Public Trustee; and
- by instrument, direct the Public Trustee to account to the infant according to the trust instrument.
The direction must state whether the sum is the whole or only part of the child’s entitlement, and the Public Trustee is under no liability if it acts on that statement. It vests in the Public Trustee all the executor’s powers over the legacy or share, and the executor must supply a copy of the trust instrument, on which the Public Trustee then acts.
Because section 7(3) protects the Public Trustee where it acts on the executor’s statement, an error in that statement is not the Office’s problem — it is the child’s. If you are an executor paying a child’s share across, state the amount and its basis precisely, and keep a copy.
For small sums there is a shortcut. Under section 22, where an infant’s share on an intestacy does not exceed K1,000, the Public Trustee may pay it to a person it thinks proper, to be applied for the child’s maintenance, education and advancement — or apply it directly.
Trusts under other laws
Section 5A lists administering a trust or estate for a minor and for a missing person among the Public Trustee’s functions. Section 9A then adds duties arising under other statutes:
- a trust or estate for a disabled or insane person under the Mental Health Act 2015;
- a trust or estate in an insolvency case under the Insolvency Act (Chapter 253);
- the assets or income of a person convicted under the Organic Law on the Duties and Responsibilities of Leadership, pursuant to section 28(1)(c) of the Constitution; and
- trusts and estates for other persons under other relevant laws.
Note the boundary in section 5A(2): a trust, an insolvency or an insane person’s estate is not an inherent function. These come in through the specific law that confers them.
Trustees handing over to the Public Trustee
Section 6 allows private trustees who are empowered to delegate to do so — with the Public Trustee’s consent — and the Public Trustee may then exercise the delegated powers and functions. Charges are as prescribed, or as agreed between the delegating trustees and the Office.
Section 6(3) closes the loop for the avoidance of doubt: the Public Trustee must not delegate those powers on to anybody else. Responsibility stops there.
The power to say no
The Public Trustee is not obliged to accept everything. Section 8 provides two escape routes:
- By leave of a Judge, it may refuse to act as executor or trustee of a will where the Judge considers the trusts and duties are so complicated, uncertain or risky that it is inadvisable for the Office to act.
- It may decline any trust absolutely or on conditions — but it shall not decline on the ground only of the small value of the trust property.
That last clause is deliberate. A public trustee office exists partly so that modest estates are not turned away for being unprofitable.
What happens to the money
Trust money is not meant to sit idle. Section 17 requires that, after 12 months from obtaining administration of an estate, the Public Trustee shall invest all money then standing to the credit of that estate — as the National Court directs, and subject to any such order, as prescribed.
Section 8A establishes an Investment Advisory Board to advise on investing trust money held for minors and insane persons. Its members are the Public Trustee (as Chair), the State Solicitor, the Departmental Head responsible for financial matters, a representative of the PNG Council of Churches and a representative of the PNG Business Council. The Board must ensure investments follow due process consistent with trustee law, that assets are managed to meet future and contingent liabilities, and that an annual report on trust fund investment goes to the Minister.
Section 28 requires all money received to be paid immediately into an approved bank account operated by the Public Trustee as trustee, with cheques countersigned by an officer appointed by the Secretary for Finance. Section 31 puts the Auditor-General over the accounts. Separation and audit are what make a trust real.
Ask, in writing, what is held, where it is invested and when it becomes payable. You are entitled to information about an estate in which you are interested — see your rights when the Public Trustee holds an estate. Take advice if you are not satisfied.
Sources
- Public Curator Act (Chapter 81) — PacLII (1986 consolidation, PDF)
- Insolvency Act (Chapter 253) — PacLII
- Constitution of the Independent State of Papua New Guinea — PacLII (section 28)
- PNG Consolidated Legislation — PacLII index
The Mental Health Act 2015 and the Organic Law on the Duties and Responsibilities of Leadership are not in PacLII’s consolidated Acts database; the index above is the starting point for locating current PNG legislation.