Quick distribution of wealth is a key consideration

PUBLISHED : Sunday, 26 October, 2008, 12:00am
UPDATED : Sunday, 26 October, 2008, 12:00am

High-net-worth individuals with assets spread over multiple jurisdictions may have unique needs when setting up a trust structure.

The most efficient and effective way to protect their business in Hong Kong, or a golf course villa on the mainland, penthouse apartment in London and money in several private banks worldwide is to consolidate them all in a simple trust structure that will help their beneficiaries when the time comes.

A trust structure can avoid long, drawn out and complex probate procedures.

It also ensures that through the trustee immediate distributions can be made on the death of the settlor to enable family members to continue their lives uninterrupted by the loss of income or other financial support.

In addition, there is now an increasing recognition in Asia of the need for long-term asset protection for future generations, according to Alan Johnson, managing director of wealth advisory firm Intertrust Group.

'Once an individual places their assets in a trust and a certain period of time transpires, the creditors of the settlor can't claim those monies back.

'In an economic environment like the present one, where the settlor may have given personal guarantees, he or she wants to ensure that ... all the money is protected and put aside for the education and well-being of the family,' he said.

When establishing a trust structure, high-net-worth individuals should think about what they want to achieve.

Is their aspiration dynastic or philanthropic? What assets do they intend to put into the trust and what benefit do they anticipate their beneficiaries may achieve from them?

To set up a trust, trust advisers need to get an accurate list of the settlor's assets and liabilities. As United States presidential candidate John McCain highlighted recently, when he couldn't recall how many properties he owned, high-net-worth individuals don't always know - or remember - what assets they hold. Mr Johnson said that from his experience in crafting an initial list of assets many individuals often reverted several times with additional investments and assets that they had forgotten about.

The second thing to ascertain is who will benefit from the estate and when. Beneficiaries are usually the spouse and children, sometimes pets or charities.

One thing that has changed in the past decade is the age limit at which children are deemed responsible enough to be the recipient of a trust.

'In the past, the offspring might be 30 years old or older. But with advanced education you find these days that people have more confidence in their children,' Mr Johnson said. 'You rarely see people now older than their mid-20s before they receive their trusts.'

The time at which the trust is distributed also depends on when the settlor wants to provide for the beneficiaries.

For some it could be immediate, for others the provision may be several years after the death of the settlor.

The administering of the assets is the next thing to be determined. High-net-worth individuals often appoint a professional trustee who understands how trusts run and their duties and obligations to the settlor.

As Nigel Rivers, director of Equity Trust, a trust and fiduciary services group, said: 'A trustee is in a fiduciary position and needs to act in the best interests of the beneficiaries and act competently to ensure the trust assets are preserved.'

In administering the trust, however, trustees are not expected to be investment advisers and, in this respect, must know whom to turn to for advice in areas in which they are not experienced.

In the case of investment decisions, this is often a bank or other financial organisation, which might be recommended by the settlor.

The settlor may also direct a trustee to discuss asset distribution or related issues with the surviving spouse, a close family member, such as a brother or sister, or a close family friend or financial adviser.