Highvern welcomed some of the UK’s most prominent and highly regarded wealth advisory practitioners for a Private Wealth Round Table lunch event.
Hosts Richard Joynt, Kerrie Le Tissier and Hugh O’Donnell were joined by Federick Bjorn (Payne Hicks Beach), Jonathan Shankland (Weightmans), Hugh Gunson (Charles Russell Speechlys), Charlotte Howard (Macfarlanes), Ben Havard (Collas Crill) and Emma Jordan (Taylor Wessing) to talk through some of the most topical issue facing private client practitioners today.
Mr Joynt provides us with an overview of the event’s discussions.
THE PTC AND ITS UNFORESEEN DISADVANTAGES
The first topic of discussion was whether the use of Private Trust Companies (PTCs) can sometimes have unforeseen disadvantages. Whilst great to offer families more participation or influence in a trust structure, potential issues can arise when the family directors of the PTC don’t fully understand their duties. In addition, conflicts can arise from family members wearing too many different hats across the structure.
Mr Gunson said that he had experienced issues around the control of PTCs following the death of the former shareholder(s), leading to unexpected issues. Ms Howard pointed out that using PT Foundations could counter this issue, as this is an orphan vehicle. Ms Jordan agreed that the PTC vehicle does have the attraction of permitting a greater degree of control, but that she had seen a situation arise where there was a majority of family members on the board and a minority of qualified professionals.
Ms Jordan commented that changing regulation may deter family members from being on the board of PTCs as obligations become more onerous such as AML training. Mr Joynt added that in the coming weeks many Jersey PTCs would be required to be registered with the local regulators in line with the removal of certain AML exemptions.
Mr O’Donnell explained that with the new requirement that all Swiss Trustees be regulated by FINMA, the Swiss authorities have introduced a Dedicated Trust Company (DTC) to sit alongside the PTC. The DTC retains the benefits of a tailor-made vehicle, whilst additionally profiting from an institutional setting, much like Jersey, with the professional trustee supervised by FINMA.
MODERN FAMILY TRENDS
The second subject the advisers addressed was how gender identity has affected practice in private wealth. Ms Le Tissier said these issues were very topical and had been discussed at the recent STEP Guernsey conference, particularly that Trust law and language needed to keep up with evolving family dynamics.
Mr Harvard said he has encountered some Jersey Trusts which have made court applications to modernise them, but professionals need to be mindful that some settlors are purposefully restrictive. The attendees discussed the extent to which Settlors can discriminate in their wishes. Mr Bjorn commented that certain issues (such as excluding people based on religion) goes against public policy and wouldn’t be permissible. Ms Jordan said it could depend on whether the decisions laid out were made prior to laws forbidding this type of treatment.
Mr Shankland mentioned that his firm had a large LGBT client base and significant expertise dealing with related planning and complexity. He has recently advised a client in a throuple relationship which has raised interesting legal and estate planning issues.
Ms Le Tissier added that surrogacy required specialist advice too as its such a wide area and a sensitive subject to broach with clients. Ms Howard added that surrogacy will have an impact on domicile, and (unless the intended parents obtain a parental order) there could be a mismatch between the domicile of the intended parents and the domicile of the child with estate planning consequences. Mr Bjorn thought it was antiquated that illegitimate children don’t constitute a child in some trust contexts, given how many children are now born to parents who are not married.
CONSIDERATION OF THE BENEFICIARIES’ WELL-BEING
It was then put to the table whether trustees should do more to understand the interaction between trusts and the mental wellbeing of beneficiaries? Mr Gunson said that children are often wary of inheriting a family business and taking on something they have no significant involvement in. Mr Bjorn commented that this raises an interesting question as to who the client is? He suggested that in an irrevocable trust structure, the Settlor stops being the client as soon as the assets are settled, so it could be considered that the wider family as a whole is the client.
Ms Howard said much rests on managing expectations about what beneficiaries can expect from family trusts, so that they can plan their lives accordingly. Mr O’Donnell mentioned that in the Middle East it was not uncommon for him to sit with an entire family to discuss the consequences of a trust structure, rather than just with elders or settlors. Mr Bjorn concluded that there is a sense of accountability that trustees are expected to know everything about beneficiaries when clearly, they can’t and don’t. This expectation gap should be talked about more and acknowledged to increase transparency.