Trusts can be a mystery to many people, often with a notion that they promise unlimited benefits for estate planning and asset protection purposes.
It is true that Trusts can be useful and achieve good outcomes. However, they do come at a cost.
Trust complexities are regularly underestimated. This is understandable with much media and so-called professionals (who are not actually all regulated by a professional body) encouraging everyone to place their home in Trusts.
The concept and people’s response to Trusts is intriguing. If you were advised to gift your home to a friend or a relative for them to look after it for you, would you do so? Most of us would likely answer “no thank you”; we do not feel comfortable giving control of our main asset to a third party.
But if someone suggests gifting into a Trust for that Trust to look after the asset for you, the response appears to be different. However, make no mistake about it, in many respects there is no difference: you are giving away your asset to another legal “person” (the “person” in this case being the Trust or rather the Trustees).
What is it about a Trust that we have faith in? And do we always fully appreciate the implications of such estate planning?
I appreciate this all sounds like a downer on Trusts, but the truth is that the concern is not with Trust law (although that can feel rather messy at times!) but with a lack of transparency or good quality advice about Trusts. I will call this the “Trust reality check”.
Basically, let us ensure that any risks or downsides of the Trust are known before entering it. Also, the emphasis on who the Trustees are going to be is a crucial point. My honest professional advice is that if you get your Trustees right, you cannot go too far wrong with anything else because any issues which could arise with the Trust can be managed by good Trustees. This may include involving professional Trustees. Lay Trustees can certainly be appointed but it is important they seek professional advice (with an appropriate professional such as financial adviser, lawyer or accountant) to ensure they are fulfilling their Trustee duties.
Pippa Bavington is an expert in Trusts; whether high value estate planning, or to protect vulnerable beneficiaries. She can help to explore setting up a Trust or advising Trustees of current Trusts with how they might need to administer it or what their powers are, as well as advising on how Trusts may be varied or wound up.
