The general obligations of a trustee to beneficiaries include the duty of care. Trustees should exercise such care and skill as is reasonable depending on the size and complexity of the trust. This duty of care, subject to the trust deed, should be used by trustees when investing trust capital. It also applies to acquiring or managing land, appointing or reviewing agents, insuring trust properties, exercising powers to compound liabilities, dealing with audits and valuations of trust property.
We at EBC Trust are able to form private trusts, provide trustees and administer trusts and their assets from Monaco. A trust is an important legal concept in common law jurisdictions and widely used for succession planning, pensions, and the holding of property. A trust can be formed with a named settlor or by declaration of trust without the settlor’s name being mentioned in the trust deed.
There are a number of different private trusts that can be established. These include; discretionary trusts, bare/absolute trusts, interest in possession trusts, discounted gift trusts and will trusts.
A private trust is an arrangement whereby one party (“the settlor”) transfers assets to the legal ownership of another party (“the trustees”) for the benefit of another party (“the beneficiaries”).
In order to be able to create a valid private trust the settlor will need to clearly state their intentions when setting up the trust. The assets to be transferred into the trust will need to be identified, as will the beneficiaries, both actual and potential.
The usual parties to a private trust include the settlor, the trustees, the protector and the beneficiaries. These details are all recorded in the trust deed. A “Letter of Wishes” from the settlor may also be prepared to guide the trustees.
The trust deed will usually include the type of investments the trustee can make, the remuneration of trustees, appointment and replacement of trustees, indemnification of trustees, insurance, the use of agents and dealing with audits and valuation.
Duty of care
When investing, trustees should consider the standard investment criteria. This includes the need to check the suitability of investments and the diversification of those assets on overall trust investments. Trustees should regularly refer back to the standard investment criteria to check that the investments made are suitable and provide diversification.
Obtaining proper advice
Trustees are required to obtain proper advice. This advice should be from qualified people before investing or disposing of trust assets, unless it is inappropriate or unnecessary to do so.
Agents and delegation
Trustees are able to appoint and delegate their duties to agents, custodians and nominees. However, trustees are not able to delegate their duties that involve for example, the powers to distribute or dispose of trust assets or the appointment of a trustee. Where agents, custodians and nominees are used there should be clear written policies from the trustees of the work to be undertaken.
Trustees are entitled to remuneration as detailed in the trust deed and are entitled to be paid from trust funds. Such remuneration must be incurred while conducting their duties as trustees of the private trust.
Uses and benefits of trusts
Private trusts have a number of benefits and uses for settlors. These include;
- Allowing settlors to plan for the future ownership of family business interests.
- Ensuring privacy of their financial affairs.
- Providing for a spouse during their lifetime the use of the trust income and on death. Following their death, allowing the capital assets to pass to their children.
- Protecting assets on behalf of their children until they reach a certain age.
- To safeguard the assets/income for vulnerable beneficiaries.
- Protection of younger generations from divorcing spouses.
A private trust will be entitled to limit access to information, except for fiscal and law enforcement, to the general public, non-beneficiaries and discretionary beneficiaries.
Trustees are required to prepare and keep up to date information on the trusts they act for. These records include details of the trust, where it is resident and administered from and the trust assets. Such records will also include the names of all paid advisors, details of the settlor, the trustees, the protector and beneficiaries and potential beneficiaries. For the individuals involved, the trust records should include their full name, date of birth, usual residential address and passport/identity card details. These records should be updated for all changes.
The trustee minutes should record all distributions made to beneficiaries together with the reason for each distribution made.
Up to date financial records should also be kept to record all trust assets, their values and locations. Records should be kept of all assets that are required to be insured and relevant policies kept current and premiums paid.
Trustees today face a number of issues relating to transparency that conflict with trust confidentiality. These include FATCA ( Foreign Account Tax Compliance Act), CRS ( Common Reporting Standard), GDPR ( General Data Protection Regulation) together with UK’s Trust Register. They all seek information that impacts on the confidentiality of trusts and on the duties and obligations of trustees.
Such transparency, although intrusive and adding to the obligations of trustees, should not be an issue for the majority of trustees.
We at EBC Trust are able to discuss with you your private trust preferences, prepare all the necessary documentation, form the trust and provide the on-going trust administration from Monaco.
Our services include:
Forming private trusts.
Advice on private trusts and underlying holding structures.
Day to day administration and record keeping of trusts.
Dealing with trust distributions and documentation.
Provision of trustees.
Regulatory compliance and filings.
GDPR risk analysis.
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