Changing laws mean constant monitoring of trust products
THE importance of constant monitoring of trusts by trustees has become more critical in recent years because of regular changing of jurisdictional tax laws and other regulations.
'Having first set up a trust to meet the various needs of a family or a corporation, we now find the increasing need to review it on a regular basis,' Paul Blackburn, head of Private Trust Services at HSBC Trustee, said. 'Regulations are becoming increasingly tight for off-shore trusts.' Mr Blackburn pointed to the recent new reporting requirements engineered by the Canadian Government and the new Finance Bill in Britain, both of which could affect trusts in Hong Kong and HSBC's other jurisdictions.
'What you set up 12 months ago may not be as valid or beneficial today because of changing global regulations,' he said.
'We stay in close contact with the family and we advise them when we think there is a change that could have a bearing on their trust.
'Then we might have to sit down once again with our advisers and review some of the legalities under which the trust was set up.' Sometimes the trustee bank will have to go back to square one and restructure the trust completely.
'It involves an ongoing administration of the trust and we are doing that more than ever before. In some cases, we will be looking at a fundamental change in a trust several times a year,' Mr Blackburn said.
While most private banks retain and sell a trust product, HSBC has a separate trustee division that works with its private banking division.
High-net-worth individuals set up trusts for a number of reasons: typically for secession planning, estate duty administration, pre-emigration planning and general tax minimisation locally and in other jurisdictions.
'We can provide the full range of trust requirements from simple forms with limited benefits to something much more complicated,' Mr Blackburn said.
'We work with advisers and put together structures that will meet the needs of our clients.' Mr Blackburn said discretionary trusts, although only developed a few years ago, were now the most commonly-used form of trust.
They gave the trustee discretion as to how and when the capital could be distributed among the beneficiaries. Discretionary trusts were extremely effective in tax administration because of the power given to the trustee, he said.
Assets were professionally protected against unwarranted risk during the settlor's life time, as well as protected for current beneficiaries and for future generations.