KEY POINTS:
Kevin Peacock, manager of private wealth management at Guardian Trust,on wealth protection through trusts.
Why would I need to set up a trust?
Depending on your life circumstances and financial situation, a trust can be a valuable part of a comprehensive wealth management plan. It can
ensure your assets are protected and your beneficiaries are provided for according to your specific stipulations.
There have been major legislative changes in the past few years and these, coupled with societal shifts, mean there is a greater need for people to protect their personal wealth from potential risk.
Changing family circumstances and dynamics, the fact people are living longer, and the evolving structures of small business are just some of the factors that may prompt the creation of a trust.
How do I go about establishing a trust? What is important to bear in mind?
The two critical first steps are to get the right advice, and to pick the right trustees. Unfortunately, these points are often given too little attention. You need to get the right advice from the outset to ensure you don't unwittingly put yourself and your assets at risk.
A trust is a complex and sophisticated legal structure that can provide substantial benefits but this comes at a cost beyond the initial set-up fees. As well as giving trustees the ability to hold assets out of harm's way, it also places legal duties on them and gives family members rights.
A good adviser will be able to assist in not only drafting a trust deed to reflect your wishes, but will also ensure you understand what you have created and why, and ensure the arrangement is future-proofed.
What should I beware of when my trustees are being chosen?
Deciding on who should be the trustee is as important as deciding who should be giving the advice. All too often people appoint trustees, or are themselves appointed as one, without understanding what the role involves.
Not all situations require an independent trustee, but being a trustee can often prove delicate, because they are expected to act impartially and not as a puppet for the person setting up the trust, while at the same time being charged with carrying out that person's original intent for establishing the trust.
How can I ensure that my trust cannot be legally challenged?
There is widespread confusion about trusts and their benefits, and a growing trend for the younger generation to challenge trusts. You may not think this could happen in your own family, but human nature, particularly when it comes to families dealing with wealth, separation and death, can bring out the best and worst in people, and create divisions that are dormant until an event triggers upheaval within the family.
Trusts that have not been set up well, and well-managed and administered over time, may be open to challenge in court as a "sham" trust. Appointing an independent trustee equipped to manage the trust correctly and meet all legal obligations can lessen this risk.