Trusts have many purposes and can be a useful tool to safeguard assets from potential family disputes in the long term. When setting up a trust however, it is essential to consider how it is structured and most importantly who will be your trustee. This is a key decision and one that includes whether to choose a corporate or an independent trustee?
Whether one chooses the corporate or independent route, the overarching duties of a trustee remain the same: to be impartial and preserve and enhance the corpus of the trust fund; and to ensure that the trust is administered for the benefit of the “objects” (the beneficiaries) of that trust. Given those fundamental duties of care, appointing the wrong trustee can lead to disputes between beneficiaries and trustees about the decisions taken, and this can lead to the breakdown of relationships between all parties resulting in expensive legal and professional fees.
Qualified, well-regulated and professionally insured.
Whilst a trustee does not have to be a professional, it makes sense to consider appointing a qualified, well-regulated and professionally insured specialist. Any perceived additional running costs are far outweighed by the benefits of objectivity, regulatory oversight, specialist knowledge and experience. They will be better placed to maintain objectivity whilst ensuring impartiality and making sure that the wealth is protected and trustee decisions are not subject to undue influence that may undermine the purpose for which the trust was created.
This situation is more common than one might think and there are many well documented cases where questionable management of a family or an individual’s financial affairs have had a significant impact on the family, none more so than Britney Spears’ legal battle with her father, Jamie Spears, which was subject to extensive media coverage. Considering the speculation about her mental health around the time she consented to the curatorship and the reported level of fees her father took, during his tenure, it begs the question why an independent conservator or trustee was not appointed at the outset.
Independence v’s control and vested interests.
If trusts were designed to safeguard the interests of those who may need help managing wealth or where the wealth creator is absent or deceased, why is independence not viewed as an essential criterion when a trustee is being considered? Is it a desire to control, a vested interest or a lack of appreciation of the importance of the role?
Whilst large institutional trustees have their place, an independent trustee not feeling the pressure to continually focus on profitability is becoming less common but is absolutely invaluable. Independent trustees are able to be flexible and tailor their approach to each situation, as the decision makers of the trust company are invariably the same people that the family are dealing with on a day-to-day basis. They will become a trusted adviser that is there to get to know the family properly and form meaningful relationships with the beneficiaries whilst taking time to understand family dynamics, challenges and aspirations. This is not something that can be achieved in the short term or when there is a permanent eye on the bottom line.
The personal touch with independence
Therefore, the independent trustee must continue to raise awareness of the value of their perspective of the world and how it could be fundamental to the successful long-term stewardship of a trust. Whilst wealth creators and prospective beneficiaries may not have focused on the value of this more personal approach, an independent trustee will certainly be able to offer an alternative view of things outside the corporate world where profit is king.
*An edited version of this article has also been featured in the GGI Trust and Estate Planning Newsletter – Spring 2022 Newsletter