Offering The Trust You Need
Trusts are a flexible tool which can be used for many purposes, both private and commercial. There are a number of different types of trust and whilst all have certain characteristics in common, there can be significant differences. It is important to ensure that the trust, the trustee and the governing law of the trust is appropriate to your needs.
At Lea & White we have over 50 years of experience in the creation and operation of trusts under various legal systems, and are therefore particularly well placed to advise those establishing trust arrangements.
Trusts may be established for a wide range of purposes, such as:
A trust is created by the owner of assets by transferring them to one or more trustees. Those trustees never become personally entitled to the assets but are under a legal obligation to deal with them in the manner specified by the creator of the trust. The instructions may be very specific, in which case the trust may be a Fixed Interest Trust, designed to benefit certain individuals in a particular manner. On the other hand the instructions may be to create a Discretionary Trust in which the decision-making is very much left to the trustees in order to provide for greater flexibility in changing circumstances.
Trusts may be made revocable or irrevocable. Trusts may exist only for as long as permitted by the law of the jurisdiction in which they are created and frequently this can be indefinite. They are simple in concept, but can be complicated in fact, and they are subject to highly technical rules. Trust law continues to develop and it is essential for anyone contemplating a trust to take proper legal advice from those experienced in the field. Flexibility is essential to assist familes in an ever changing world.
Lea & White has advised four governments on their trusts and foundations laws and have a wide comparative knowledge of such laws worldwide. This includes the knowledge and use of trusts for tax efficiency.
Lea & White are well able to offer such advice, both to individuals and to trust companies, in an independent, practical and balanced manner.
We can help clients establish an appropriate trust in the most suitable jurisdiction. In many cases the jurisdiction of the trust will be guided by the choice of trustee and we can suggest appropriate trustees if required. We will help the client agree the terms of the trust with the trustee and prepare all necessary documentation for the establishment of the trust, and supervise the transfer of assets.
If requested to do so we can then provide regular reviews of the structure to ensure that it continues to meet the client’s needs. In this ever changing world such reviews are essential.
DISCRETION PRESERVES FLEXIBILITY
Where the client leaves discretion to the trustees to determine certain matters when he or she creates the trust, it is known as a “Discretionary Trust”.
Discretionary Trusts are probably the most widely adopted type of trust today for general planning purposes, offering many benefits, but principally the advantage of preserving flexibility.
THERE CAN BE COMPELLING BENEFITS
The discretion granted to trustees may be very limited, or very broad.
For example, the client may give assets to the trustees with the requirement that they shall decide who, out of a group of possible beneficiaries specified by the client, shall be granted a benefit, when they will receive it, and how much it will be. In the meantime the trustees may enjoy very wide powers to deal with the assets, and even to add or remove beneficiaries to or from the list of potential recipients, if that is specified by the trust documentation.
As with all trusts, however, it is important to remember that the assets never become the property of the trustees, and they cannot deal with them entirely as they wish for their own benefit.
Although a wide discretion may seem unacceptable at first sight, there are often compelling benefits to be obtained, including:
With proper planning, sound trustees and the advice and experience of Lea & White, many of the apparent drawbacks of Discretionary Trusts can be overcome, and the client can be given the necessary comfort to establish a vehicle which will continue to meet his or her needs for many years to come.
OTHER SOLUTIONS ARE AVAILABLE
Apart from Discretionary Trusts there are a number of other possible trust formats which can be adopted by the client to meet his or her needs. For example:
Fixed Interest Trusts avoid the concerns which many people feel about giving trustees wide discretion. These are a traditional form of trust which is created to benefit specified persons, and at a definite time. It will also specify the benefit they are to receive, either in money terms, or perhaps as a certain percentage of the total assets held in trust. This certainty is the greatest biggest merit of such a trust, as it gives the person creating it the confidence that his intentions will be fulfilled. On the other hand it may be its main drawback, in that those intentions may not always be appropriate in the light of changing circumstances and taxation implications.
Charitable Trusts may be established for philanthropic purposes. These trusts avoid any possible the limitation on their duration , and can continue forever while their charitable objectives can still be met.
Purpose Trusts are a specialized form of trust which may be adopted as part of a holding structure, where the object of the trust is to deal with an asset in a particular way rather than to benefit anyone.
Will Trusts can be created to govern matters after the death of the Testator. However these are subject to certain drawbacks, including the likelihood of taxation on the estate, and the fact that the process of proving the Will is required to validate the trust. Nevertheless they have their uses in some circumstances.
This list is not exhaustive, and some jurisdictions have introduced laws creating specific trust structures to meet certain needs. We are pleased to discuss the merits and drawbacks of different arrangements with the client to ensure that he or she has the structure most appropriate to their needs and concerns. In this respect a Preliminary Memorandum of Advice can be used initially to help the client understand and decide what to do.
WE CAN HELP YOU RETAIN CONTROL
A regular concern of clients establishing a trust is loss of control over trust assets, and business assets in particular.
It is essential for the integrity of a trust that the Settlor genuinely confers control over the assets on the trustee. Trust law also requires that the trustee involves itself in the affairs of underlying companies. Failure to do so can give rise to challenges to the trust.
Lea & White have nevertheless developed a structure which permits the Settlor or others, as the Settlor wishes, to retain legitimate control over the management of the assets in a manner consistent with trust law, and which distances the trustee from the operation of underlying companies and the investment of underlying trust assets. We have successfully established a number of such structures, which clients particularly like.
Dependent upon requirements and taxation, the trust concerned may be of any type and be governed by any law. The underlying companies may be incorporated in any jurisdiction. This solution is therefore not jurisdictional specific, and Lea & White would be pleased to discuss the advantages of these arrangements with prospective clients.
The use of trust arrangements is not limited to private structures. Trusts can be a powerful business tool and are typically used in a range of corporate and commercial activities where they can offer a flexible and secure vehicle to hold or administer corporate assets.
They may be used in investments products such as Unit Trusts or Real Estate Investment Trusts, or as part of an overall investment or risk limitation strategy.
They can also be used for off-balance sheet shareholding or financing arrangements, or to hold security interests.
For corporations wishing to incentivise and reward management and employees, Share Incentive Schemes and similar benefits will commonly be held under trust structures, as will Pension Funds and other retirement schemes.
We have experience of advising on and structuring schemes for a wide range of commercial purposes, and can help you establish arrangements which meet your individual needs.
Although it may not be not a popular subject for many people, a Will is generally essential if the client does not want to rely on the dictates of the lawmakers to govern the disposition of his assets.
Most countries have some form of law governing what will happen to a person’s assets if he should pass away without leaving a valid Will. Often these laws will not provide for the persons, whom the client would wish, to administer the client’s estate nor benefit the persons whom the client would otherwise wish to inherit his or her estate.
The situation becomes even more complex for the typical client with assets in a number of different jurisdictions. For that client, or rather his successors, the process of dealing at a distance with different laws in each of these jurisdictions and trying to make some sense of frequently conflicting requirements can be a nightmare. It will inevitably be time consuming and almost certainly expensive.
By having even a simple Will, the client can determine who ultimately will be able to take control of his assets, and who will benefit from them. For more complicated arrangements a series of Wills may be called for, each dealing with property in different jurisdictions.
What is particularly important, however, is to get it right, as the legal formalities for creating valid Wills can be very detailed and specific. Lea & White are experienced in drafting Wills for clients and also liaising with foreign lawyers to arrange for the appropriate documents to be created in other countries.
