Yesterday at the International Trusts & Private Client Forum in Jersey, during an excellent session on succession planning and the 'next gen', the question was posed: if the 'next gen' are more sceptical about trusts, what other structures are practitioners seeing used?
The reality is that structures/entities/vehicles - call them what you will - will remain a necessity for many families to hold wealth. The downsides of individuals owning assets personally are many and varied, including risk of death, incapacity, divorce and creditor risk, financial immaturity, intra-family disputes, problems arising from local laws, conflict of laws, and many, many others. In many cases individual ownership will simply be inappropriate because it puts too much control in the hands of that individual.
These issues can arise in any scenario and at even modest levels of wealth. They are universal; they do not only impact the wealthiest.
Many types of legal entity are used to hold private wealth. These include companies, foundations, partnerships, funds, insurance products, and many others. All of them come with their own list of advantages and disadvantages - again many and varied. Some are more appropriate than trusts in particular scenarios, or particular jurisdictions. But no single one of them has yet displaced the trust as the leading structure for divorcing control from beneficial ownership, and mitigating many of the above risks, particularly where there is exposure to jurisdictions with a common law flavour. None look likely to displace the trust any time soon.
Equally there is no magic wand ready to be waved in the direction of a completely new structure. The current vehicles that we have and use will evolve, new ideas and angles will be thought up. But it seems highly unlikely that there will emerge a brand new legal entity, that nobody has thought of yet, but which is good enough and works well enough to supplant the trust. There is no panacea.
So the trust, for all its faults, will remain a key tool, and possibly the key tool, for years to come. Which is why work being carried out by STEP and others, through thought leadership such as the recent STEP 'Social and Economic Benefits of Trusts' document, are so important. We need to build greater understanding of trusts, dispel myths and ultimately rehabilitate the trust. Because we are likely to be using it for many years to come.
The wealth management structure of the future? Ladies and gentlemen, I give you... the trust.
The rationale behind trusts has been to serve the fundamental needs of the public