Wealth protection
People of high net worth require a Trust be established for very many different reasons, but all with the same objective, wealth preservation. You may for example be a specialist surgeon or other professional who fears a potential damages action, and needs to protect assets from potential litigation. Your money would be at risk from creditors, if it were simply held in a bank account or share portfolio in your own name.
Your money is also at risk if the Trust protections failed for any reason. A Trust may have been set up for a reason affording sensible planning and wealth protection for the “Settlor,” as you the person considering setting up a Trust are known. A Settlor settles money and other assets into the Trust irrevocably for the life of the Trust, up to 80 years. The longer the Trust has been established prior to an event potentially threatening your wealth occurs, the less likely a creditor is to succeed in applying to court to have the Trust set aside as a “sham”. If it were declared a sham the court would have the Trust dissolved and the assets paid over to your creditors. It is therefore imperative that the Trust is properly settled at start up, and following the right advice.
Age matters
For instance:
A young man builds up a business with a little capital left to him by his late Aunt. He sells the business subsequently for a great deal of money. He is advised to put the proceeds of the salet into a Trust for his and his future children’s benefit. He later marries, and after a while he and his wife fall out, and are to divorce. Since the Trust was settled by him initially, his Trustees have been paying him a monthly amount for his maintenance and living expenses to top up his own modest salary. He also lives in a house the Trust bought and still owns. Aggrieved by lack of access to her husband’s wealth, his estranged wife might allege the Trust was created only in an effort to deprive her of a fair share of the matrimonial assets. If successful in her bid the Trust is set aside as a sham.
If the Trust has been settled for many years it becomes harder and harder to allege it is a sham, for it may have existed long before the man even met his future wife. He could not be forced to leave or sell his home as it belongs to his Trustees, (although they own it for his benefit of course). The Trustees could in view of the divorce situation decline to keep paying as much monthly to him. That way his ability to pay maintenance for his wife’s keep, would be limited to his own salary.
The right advice
Even better still:
Had his Aunt left him the same capital but on Trust, the Trustees would have invested the capital in his business venture, and when the business was sold the sale price would return to the Trust as the owners of the business. That structure would be nigh impossible to call a sham by someone hostile trying to get their hands on his money.
Remember
In order for it not to be suggested the Trust is a sham, the beneficiary should have no power over the administration of the Trust assets at all. That is entirely in the hands of your Trustees and Corlett Bolton Administrative Services Limited. Money settled into trust is given for the life of the Trust, as are further future donations by you to the Trust irrevocable. Of course the Trustees may always consider requests for a disposition to a beneficiary, (our young man in this case) of all or part of the Trust assets. If all is given over to the beneficiaries directly, the Trust fails for lack of assets. Corlett Bolton would draft the necessary Trust Deed for you, provide advice and can offer you Trustees and full Trust administration services.
Looking after trust capital
It is the duty of your Trustees to manage Trust assets to best financial advantage to the benefit of the Trust beneficiaries, and they would be failing in their statutory duty not to do so. The Trustees would likely determine to invest in a managed stock portfolio, at least portion of the cash available, unless you had expressed particular preferences in your letter of wishes. A letter of wishes is an informal letter to your Trustees, giving them an idea of your preferences and thinking. This cannot affect their discretion however. We have at present similarly managed risk-averse portfolios in the care of selected Asset Managers, which have shown consistent capital growth over the years, and we would expect the same for you.
Once all risk of events threatening wealth preservation has passed (if that is the Trusts intention), or the Trust has reached the end of its life, the entire capital of the Trust can be made over to named beneficiaries and the Trust dissolved.
