What is a trust?
A trust is simply a rule book for the management of property by one person (the trustee) on behalf of another (the beneficiary).
Whether a trust can deliver wealth conservation or asset protection outcomes for a person, family or beneficiary group depends not only on the terms of the trust (the rule book) but how the trustee operates the obligations set out in the Trust terms.
Do you have an interest in any trust as a trustee or otherwise?
When interviewing clients about their wealth conservation, estate administration and succession objectives, we normally ask them “Do you have an interest in any trust as a trustee, controller or beneficiary?”. Most often the answer is no.
Then we ask clients of working age if they have superannuation? The answer is normally yes.
Superannuation is in fact owned in a trust by a separate person to the members (the Trustee) and therefore cannot form part of the estate managed by a will unless arrangements are made to pass the superannuation death benefits to the legal personal representative of a person’s estate (the Executors or Administrator) as allowed by superannuation law.
While a simple example, this case illustrates that unless you know the purpose of the trust, it is not possible to deal with it effectively in a person’s wealth conservation, estate administration or succession plan.
Trusts and wealth conservation
For our clients
You need to understand how you can hold wealth for the long term if you want to make sure you have money available later in life. A purely discretionary family trust is in most cases is like a rudderless ship going in no particular direction because the course of administration is wholly driven by the discretionary decisions of the trustee.
Financial abuse can easily emerge when there is a divergence of values and purpose between the trustees, controllers of a corporate trustee and the trust beneficiaries. If you are a beneficiary of a trust, let us ask the question, “What is the purpose of this trust in which you have an interest?” If you do not have a clear and simple answer to this question, you may be at risk of abusive or coercive conduct in the future. We can help resolve this question.
For our professional colleagues
We are preparing further resources on this topic which we will make available via the downloads section of our website in March, and we’ll let you know when these are ready. We are also available to provide a technical briefing on this subject to your staff or clients. Please contact Michael Perkins or Clarence Leung to arrange any technical events for your organisation.