A colleague asked me to look at a couple of trust documents recently. They had both been established some decades ago and I found myself fascinated by the content and how it was written. I know, I know, sad but hey, someone’s got do it…
Some of the language in such documents can appear completely archaic and it is little wonder that clients (and advisers) can shy away from this area of planning as a result.
I guess the real gift is in finding an easy way to convey how the client’s objectives can be met by the use of an appropriate trust – no easy ask, particularly if the mere mention of the subject conjures up recent headlines about “Panama Papers” etc.
That said, there is merit in considering trust planning and I am increasingly seeing clients less motivated by tax mitigation and more interested in “protecting the bloodline”.
It is perhaps an indication of how society has developed, with divorce rates increasing over time and a downward trend in those getting married – leading to a level of uncertainty/instability, whether perceived or real.
With this backdrop, clients are considering the protection afforded by trusts to ensure that their hard-earned wealth is not exposed to future generations’ divorce proceedings.
I think this is an understandable motivation and it is always good to help clients achieve clarity of thought and intention. A good conversation can help clients gain peace of mind.
Of course, it is then crucial that the right type of trust is formed, mindful of those objectives and with an eye on any tax consequences that follow. This is what makes this kind of planning the perfect opportunity to engage with legal and tax advisers, to make sure that all bases are covered.
Once the structure is agreed and in place, an appropriate investment strategy has to be considered and this is what we have been engaged in with the cases I mentioned at the start of this blog.
For me, having a good grasp of trust law and of the different options a client has considered – and an understanding of what they wanted to achieve at the outset – helps direct what is the best solution from an investment perspective.
And it doesn’t have to be too complicated – explaining the basic structure of how trusts are set up to clients is a great starting point – settlor, trustee, beneficiaries, and who does what and when – can help break down the mystique that can surround what I find to be an incredibly interesting area of planning.
I know, I know…
George Houston is senior development and technical manager at Mattioli Woods