Loss of control
One of the main concerns raised by clients when considering a trust is the loss of control, due to the fact that the trustees become the legal owners of the trust assets and the fact that sole discretion over the use of the trust property is with the trustees and not the settlor of the trust.
There are some practical solutions which may help to alleviate some of these concerns:
- Choice of trustees
- Use of a letter of wishes
- Appointment of a protector
1. Choice of trustees
Consideration should be given as to whom to appoint as a trustee. It is possible to appoint a family member or a friend, but it is imperative that they understand their legal obligations and of course fulfil any reporting requirements. For these reasons, as well as financial planning considerations (eg if the trust is to be used for a number of generations), professional trustees may be considered.
2. Use of a letter of wishes
A letter of wishes is a document which the settlor provides to the trustees setting out their wishes. For example: ‘On my daughter obtaining age 21, I would like the trustees to consider advancing £100,000 to her’. A letter of wishes is not binding on the trustees but helps to provide some guidance of the settlor’s wishes. This is especially useful where a professional trustee is used.
3. Appointment of a protector
It is also possible to appoint a protector. The term ‘protector’ is used to describe a person who is generally granted by a settlor (under the terms of a trust deed) some powers over the administration of a trust; such power to be exercised in addition to powers granted to the trustees. It is possible for the settlor to be appointed as the protector of the trust.
The protector does not have the same powers as a trustee and whilst the protector would not be involved in the day-to-day administration of the trust, they will have to fulfil certain duties and responsibilities.
For more information on appointing a protector please read our article The role of a protector.
Types of discretionary trusts available from Quilter
The following is a very high level overview of the types of discretionary trusts available through Quilter. For more information on these and other trusts available please contact your Quilter consultant.