Having made the decision to establish a trust offshore, clients and their advisers will give a lot of thought to the jurisdiction in which the trust is to be created. The location will be selected due to perhaps geographical location, political stability, legal system or the range of potential trustees which have operations in the jurisdiction.
Much has been written on the differences between the offshore jurisdictions available to clients but there is little on the process of choosing a trustee. So what should clients consider when making what can be a very crucial decision?
Often the first question asked by clients is what level of fees will be incurred? Whilst this is a most understandable question it is perhaps something which should be considered after a number of other issues have been covered.
If at all possible clients should travel to the jurisdiction they have chosen and meet with a number of potential trustees. This should not be too much of a hardship as the favoured jurisdictions for establishing trusts are also very pleasant places to visit.
What are the questions to raise at this first meeting? Well firstly it must make sense to ascertain the level of experience the organisation has in acting as a trustee. How long have they been in this particular business? How many personnel do they have doing trust administration? Are the personnel professionally qualified? These are all questions which a prospective trustee should be able to answer to your satisfaction before proceeding.
Another significant factor for clients to consider is the capital base of the trustee. One of the clear reasons for selecting an institutional trustee is the knowledge that if for any reason it was necessary to bring a claim against the trustee that they would have the resources to meet any judgment made against them.
The relationship between a trustee, the settlor and beneficiaries of a trust is very different to the relationship which you may have previously experienced with your bank. The establishment of a trust will often give significant powers to the trustee and therefore you must have the utmost faith that the organisation chosen to administer your assets will do this in a most professional manner.
A prospective settlor should therefore not only meet the senior management of the trustee but also the personnel who will deal with the trust on a day to day basis. The competence of these individuals will be an essential factor for the relationship to run smoothly.
When selecting a trustee a decision is often made at the same time on the choice of an investment adviser. This may be the same institution as the trustee or may be a separate company. In any event similar questions should be asked of the investment adviser as of the trustee but with perhaps more emphasis on recent investment performance, the number of clients under management and the total amount of assets for which they are responsible.
It will be important for the client to receive clear information on a regular basis on what investments have been made within the trust and generally what transactions have taken place. The potential settlor should therefore be asking to see examples of the reporting normally sent to clients to ensure that it will meet their requirements.
Whilst it is possible to remove trustees and appoint new trustees in their place it is time consuming and not without cost. It can therefore be seen that the initial choice of trustees is an important decision for a client and one which should only be made after investigation and careful thought. After all, a trust by its very nature is a long term relationship.
This article provides a general outline on the subject at the time of writing. It is not intended to be exhaustive nor to provide legal advice in relation to any particular situation and should not be acted on or relied upon without taking specific advice.