The evolving challenges of trusteeship in a complex world

When considering the challenges trustees face, the instinctive starting point is often litigation from dissatisfied beneficiaries. However, in today’s ever-more complex environment, the reality is rarely so straightforward. Tracey Neuman, Executive Director at Ocorian, recently attended the Thought Leaders Contentious Trusts Circle Europe event in Switzerland and shares her reflections.
 

Key takeaways

As anyone in the private wealth industry knows, the reasons a beneficiary may be unhappy are numerous and not always directly related to the trustee. But with the increased use of AI, beneficiaries are starting to use these tools to develop strategies for manufacturing relationship breakdown. This can be one beneficiary amongst a class. These tools can include bombarding the trustee with excessive disclosure requests or using social media (or the more established media) to target specific sectors, practices, or individuals. These tactics can cause significant stress on trustees, partly because of the time required to respond appropriately. It also often comes at a significant cost by the time legal advice becomes necessary.

Increased global uncertainty is also adding to these issues. Trustees have an obligation to manage the assets in the same way as a reasonably prudent investor. But with market volatility and the reduction of available safe harbours, what strategies do you adopt? It is simply no longer good enough to bury your head in the sand and hope the markets correct themselves. On top of this, your beneficiaries may have views about what industries are acceptable to invest in, which may not align with areas of market positivity. The need to balance those agendas, which may not be shared by all beneficiaries, with the need to obtain an acceptable return on the funds is increasingly complex and requires specialist knowledge.

We then need to consider the push for global wealth transparency through beneficial ownership registrations and the criminal sanctions that can stem from incorrect filings, and heaven forbid anyone connected to a trust gets sanctioned. As with the investments, these areas require specialist, detailed knowledge of often complex and inconsistent legal approaches, often within the same jurisdiction. Failure to properly consider any of these areas can be a source of conflict.

You may wonder, based on the above, why I decided to become a trustee. It is apparently not a rational thing to do. The simple answer is that I like people and I want to help them succeed in their endeavours and lives. Often, this can involve a degree of education, but such conversations should not be shied away from. They are incredibly important, and hopefully, they can mitigate the risk of a disgruntled beneficiary. Never underestimate the power of sitting down with a cup of tea and just finding out about what is going on in their lives. Education is a two-way street. The beneficiaries need to understand the structures around the wealth, and the trustee needs to know the beneficiaries well enough to work towards a productive and happy life for them.

From my perspective, all of the above points to the need to identify the right trustee when the structure is being created. It should also be kept under review as the generations move on and the world changes. Nothing stays the same, and wealth structures should evolve accordingly.

About Tracey Neuman

Specialising in complex, multi-jurisdictional tax and trust arrangements, Tracey has over 16 years of experience advising high-net-worth clients on a range of matters, from estate planning to the tax treatment of investment products.

Contact Tracey here.