The Crucial Role of Trustees in Preserving a Client’s Legacy

In today's complex world of high net worth families, where wealth is increasingly mobile across international borders and beneficiaries span the globe, the selection of a trustee is an important decision in wealth management and estate planning. In this article, Equiom directors, Robert Cattle, Charles Crossley, Andrew Cardwell, and Nina Johnston, explain why the choice of trustee is so crucial and outline the key factors clients and their wealth partners need to consider when deciding on one. 

Key Factors When Selecting a Trustee 

“The trustee a client selects to safeguard and manage their wealth can make all the difference when it comes to ensuring their financial legacy is preserved with the utmost skill and integrity” states Nina Johnston, Managing Director of Equiom’s Isle of Man office. While cost is a consideration, it is one of many other factors which should be considered, including: 

1. Professionalism and integrity:  
   The trustee should be professional, ethical, and honest, maintaining confidentiality and avoiding conflicts of interest. 

2. Fiduciary experience:  
   The trustee should have proven experience as a fiduciary and be skilled at managing trust assets in compliance with trust deeds and applicable laws. 

3. Financial responsibility:  
   A trustee should have a strong track record of managing finances and putting the family's financial goals at the forefront. 

4. Understanding the family:  
   A trustee should understand the family's dynamics and values, effectively communicating with family members at all levels. 

“Families should also consider the trustee's geographical coverage, language capabilities, time zone compatibility, ease of access, and the presence of good travel links to efficiently address the international aspects of their trust” adds Robert Cattle, Client Services Director. “A trustee's range of services, including their in-house legal and tax expertise, as well as their ability to tap into a network of professional advisors is also an essential consideration.” 

Importance of Expertise in Cross-Border Tax Regulations 

In today's global financial landscape, a strong understanding of cross-border tax regulations is imperative for families with international interests. The ever-evolving taxation and compliance regulations requires a trustee with extensive knowledge of potential issues. While trustees may not be experts in all matters, their broad awareness, diverse experience, and access to specialist expertise allow them to effectively navigate international complexities. 

Andrew Cardwell, Director of Equiom Tax Services, explains: “In the Isle of Man our in-house tax team specialise in UK and Isle of Man taxation, with expertise in UK anti-avoidance provisions and their implications for trustees, settlors, and beneficiaries. While we may not advise on specific foreign tax issues, our wealth of experience means we can intuitively identify potential concerns. Our trustees can also consult our in-house tax team to consider the broad principles and tap into our global network of tax advisors which we have built up over time. 

Balancing Cost and Expertise 

Trustee fees can vary significantly worldwide, and striking a balance between cost and expertise is essential. Robert Cattle explains, “In many cases, choosing a trustee based solely on cost can be shortsighted, as the financial consequences of an inexperienced trustee's mistakes can outweigh initial savings. It’s vital to evaluate the trustee's experience, qualifications, and track record. Clear communication regarding fee structures is also crucial to avoid surprises and misunderstandings.” 

Nina Johnston recommends viewing the cost of an experienced trustee as an investment rather than an expense, adding: “The true value of the trustee is not visible until such time as the trust has been compromised or challenged by which time it becomes costly to rectify. Choosing a trustee with a track record of success in managing international assets is an investment in the future for the client’s family wealth.” 

Cultural and Legal Differences Across Jurisdictions 

In today's interconnected world, high net worth families are no longer constrained by geographical boundaries. They diversify their investments across multiple jurisdictions, and their beneficiaries frequently relocate across the globe, giving rise to complex cross-border tax and inheritance considerations. As Nina Johnston points out, "In this intricate web of transparency and global financial regulations, having the right trustee with expertise in navigating a myriad of reporting regimes can make all the difference." 

Cultural nuances play a vital role as well as Charles Crossley, Director of Equiom’s Private Client Services in the Isle of Man highlights, "In some cultures, the concept of a trust may not exist or may be interpreted differently. This can lead to challenges in the selection of trustees and the management of trust assets. Legal disparities between jurisdictions can also create hurdles in the administration of cross-border trusts. For instance, in common law regions, trusts are frequently utilised for tax-efficient asset management and succession planning, while civil law jurisdictions may not recognise trusts in the same manner.” 

While cultural and legal differences can pose challenges, they also present opportunities for high net worth families. Certain jurisdictions may offer more favourable tax treatment and asset protection laws, while cultural disparities can provide unique insights into investment opportunities and business practices not available in other regions. 

A knowledgeable trustee can help high net worth families to mitigate challenges and maximise the opportunities in the complex landscape of cross-border wealth management.  

Trustee Qualities and Best Practices  

To ensure the long-term preservation and growth of wealth, high net worth families should look for trustees with qualities like integrity, expertise, communication skills, objectivity, and stability.  

“For example, a client selected us as future trustees with appointment to take effect on their death” explained Charles Crossley.  “However, they faced constant financial requests from their four adult children. They realised it was unwise to continue supporting their children in this way and eventually decided to settle their wealth inter-vivos, knowing that a resolute trustee would scrutinise and decline requests when necessary.  

Choosing the right trustee is therefore critical for ensuring the long-term preservation and growth of a client’s wealth, while also making sure their beneficiaries are taken care of.” 

Other best practices include engaging with the family regularly, reviewing and assessing trust investments, ensuring tax efficiency, and monitoring the performance of investment managers. Robert Cattle adds, "Continually reviewing and assessing the trust investments to ensure risk is being managed and returns are appropriate is crucial”. 

Conclusion 

In the world of international mobility and high net worth families, the choice of trustee is a decision that should not be taken lightly. It's a choice that can shape the financial wellbeing of a client’s family for generations to come. While the cost of expertise may be higher, the peace of mind, protection of their assets, and the potential for optimised financial outcomes make it a value proposition that cannot be ignored. Remember, not all trustees are the same. The client’s choice matters, and the investment in an experienced trustee is an investment in the enduring legacy of their wealth.  

This article was first published in the ThoughtLeaders4 Private Client Magazine Issue 13.

This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. This article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained within this article without obtaining specific professional advice. Please contact Equiom Group to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees, and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.