When is a trustee not a trustee?
When is a trustee not a trustee?
Q: When is a trustee not a trustee? A: When it is just an arbitrator, or a diplomat, or an entrepreneur, or a counsel
Classically, an offshore trust sits at the top of a personal asset-holding structure. Often assets have been settled into a trust and then placed by the trustees into holding vehicles, which in turn either invest in marketable securities or even in separate businesses. The trustee’s role in this situation is therefore primarily administrative, ensuring that the structure is operated correctly with the correct safeguards and, in many cases, appointing and monitoring the directors of the holding company, as well as independent asset managers to manage the trust’s assets. Done properly, this means selecting the right structures, keeping them in good standing, negotiating asset management agreements and investment guidelines, continuing due diligence, and maintaining proper accounting and other administration.
Trustees, however, have other roles that are often insufficiently recognised by settlors – and even some trustees. Although a trustee is usually not required to follow the wishes of a settlor or beneficiaries, it should take note of these, and has to balance, reconcile and manage the interests, ideas and expectations of the settlor and the various beneficiaries. This can be regarding the investment or other use of trust assets, as well as the distribution policy, especially when beneficiaries have different needs. The trustee must often play the role of an arbitrator or “honest broker”, trying to find solutions acceptable to everyone whilst at the same time preserving the integrity of the trust structure. The trustee’s mission is to ensure that the blessing of wealth shared between beneficiaries does not turn into a curse, where differences between the beneficiaries split the unity of the family, especially when the settlor, as the head of the family, is no longer alive.
It’s called a “trust” for a reason. Ultimately, however much the trustee may consult, it’s the trustee who takes the decisions, in co-ordination with the protector if there is one. Hiring and firing of asset managers, overseeing the operation of (usually family) businesses where the trust is the controlling or even a material shareholder, negotiating disposal of the interest, dealing with tax issues, disputes and litigations relating to trust assets: these are all decisions that may have to be made by a trustee.
Beneficiaries may be struggling to decide how to deal with their wealth: when to take distributions and when not, what the tax implications are, and how the trust assets should be integrated into the estate planning strategy. Here the trustee becomes a counsel, working with beneficiaries to design the best solution taking into account family circumstances.
In order to perform this function properly, the trustee needs considerable knowledge and skill, entrepreneurial as well as professional expertise – and diplomacy. Rosetrust, blending its administrative excellence and legal experience, is well-positioned to fulfil what can be a challenging mission.
For more information about Rosetrust’s trustee services, please contact Galileo Guidon at galileo.guidon@legalease.ch.