Share

21/05/2014

Adviser research* from Skandia International, part of Old Mutual Wealth, shows 22% of advisers have experienced problems with a trust arrangement ending in a dispute when family members are appointed as trustees. There are a couple of alternative options that can greatly help advisers and their clients; including setting up a protector on the trust, appointing a corporate trustee to manage the trust, or a combination of the two.

Appointing family members as trustees is often viewed by many as the obvious choice, as family members are those closest to them and they believe they will ensure their wishes are carried out on their death. However, what can often happen is that upon the death of the settlor, the family members can start to fall out and may not see eye to eye on how assets should be distributed to beneficiaries. Family members are emotionally attached to the situation and may have vested interests, so may find themselves in a position where they have a conflict of interest. If they have to take a vote on an action and they are split, there is no easy way to resolve the dispute as they must all agree in order to carry out an act.

Setting up a protector can help. A protector is an individual (or company offering fiduciary services) who can be appointed to fulfil certain duties and responsibilities. The protector will also be given certain powers under the terms of the trust. They do not manage the trust and are not responsible for the administration of the trust or ensuring any tax is paid correctly. However, they do have the right to dismiss a trustee, and where there are disputes or uncertainty among the trustees, they can make the final decision to be taken by the trustees in respect of allocating trust property to beneficiaries (other than for Bare Trusts).

The person chosen to be protector might also be a trustee (if appointed during the settlor’s lifetime), but in situations of conflict, they will have legal power to make the final decision.

An alternative to using family members as trustees is to use a corporate trustee, such as Royal Skandia Trust Company. Using a corporate trustee will ensure the wishes of the settlor are considered and that on-going consideration of the beneficiaries’ needs are taken into account in an unbiased and fair way. A key benefit of using a corporate trustee is they will be able to take care of all the administrative responsibilities, such as maintaining trust records, filing the appropriate tax return at trust level and provide continuity for generations to come.

In the recent international adviser survey, advisers listed the following as the top three benefits for corporate trustees;

  1. Professional oversight
  2. Professionals ensure the wishes of the settlor are considered
  3. Professionals ensure taxes and liabilities are taken care of

Using a combination of corporate trustee and protector could provide a perfect solution for those who are hesitant to relinquish control to a corporate body, but who don’t want family members to be in a potential position of conflict or face the administrative burden of running a trust.

The settlor could appoint themselves as protector and nominate a family member to become the protector on their death. This means the corporate trustee looks after the administrative duties of the trust without burdening the settlor or family members with the responsibility. However, the settlor has peace of mind knowing they, or their family member, can ensure their wishes are being considered.

Not all providers offer the option of having a protector on the trust, so advisers and their clients need to check this first.

Paul Schrijver, international specialist for Skandia international, comments:

“The role of trustee carries with it significant responsibilities. People who appoint family members as trustees may not be aware of the burden they are placing on them and the risk of family conflict they are creating. Using a corporate trustee can help relieve this burden, and setting up a protector can give valuable reassurance to the settlor that a family member or other third party such as a solicitor, will have the legal power to oversee the trust on their behalf.”

 

*Skandia International Q2 2014 adviser survey, completed by 377 financial advisers from across the globe.

For more information contact

Sophie LentonOld Mutual Wealth02380 916 77007834 499 558
Tim Skelton-SmithOld Mutual Wealth02380 916 99807824 145 076

Notes to editors:

Quilter is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

On a ‘go forward basis’, Quilter oversees £ 111.6 billion in customer investments (as at 31 March 2018).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset and single strategy investment solutions; and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Old Mutual Wealth Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Old Mutual Wealth’s multi-asset investment solutions business.

The Quilter businesses will be re-branded to Quilter over a period of approximately two years following separation from Old Mutual:

  • Intrinsic to Quilter Financial Planning
  • Private Client Advisers to Quilter Private Client Advisers
  • The Multi-Asset business to Quilter Investors
  • The UK Platform to Quilter Wealth Solutions
  • The International business to become Quilter International
  • The Heritage life assurance business to Quilter Life Assurance
  • Quilter Cheviot will retain its name.

On 19 December 2017, Old Mutual Wealth announced that it has agreed to sell its Single Strategy asset management business to the Single Strategy Management team and funds managed by TA Associates. The proposed transaction is subject to customary closing conditions, including regulatory approvals. 

Quilter is part of Old Mutual plc, a FTSE 100 group that provides investment, savings, insurance and banking. For the year ended 31 December 2017, Old Mutual reported an adjusted operating profit before tax of £2.0 billion. For further information on Old Mutual plc and the underlying businesses, please visit the corporate website at www.oldmutualplc.com.

NOT FOR DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN, OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL.

These materials are not an offer to sell, or a solicitation of an offer to purchase, securities in the United States. The securities to which these materials relate have not been registered under the US Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offering of the securities in the United States.

These materials do not constitute or form a part of any offer or solicitation or advertisement to purchase and/or subscribe for Securities in South Africa, including an offer to the public for the sale of, or subscription for, or the solicitation or advertisement of an offer to buy and/or subscribe for, shares as defined in the South African Companies Act, No. 71 of 2008 (as amended) or otherwise (the “Act”) and will not be distributed to any person in South Africa in any manner that could be construed as an offer to the public in terms of the Act. These materials do not constitute a prospectus registered and/or issued in terms of the Act. Nothing in these materials should be viewed, or construed, as “advice”, as that term is used in the South African Financial Markets Act, No. 19 of 2012, as amended, and/or Financial Advisory and Intermediary Services Act, No. 37 of 2002, as amended.

These materials are distributed in any member state of the European Economic Area which applies Directive 2003/71/EC (such Directive, together with any amendments thereto including Directive 2010/73/EU, the “Prospectus Directive”) only to those persons who are qualified investors for the purposes of the Prospectus Directive in such member state, and such other persons as these materials may be addressed to on legal grounds, and no person that is not a relevant person or qualified investor may act or rely on this document or any of its contents.

This document is being distributed to and is only directed at: (i) persons who are outside the United Kingdom; or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 as amended (the “Order”); or (iii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons in (i), (ii) and (iii) above together being referred to as “relevant persons”). Any invitation, offer or agreement to subscribe, purchase or otherwise acquire securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

This press release is for journalists only and should not be relied upon by financial advisers or customers.

Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.

This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.