Evidence uncovers trustee weaknesses

2006 uncovered what many trust experts have known for some time, according to Mark Maxwell, chief executive of Integrity Trust Limited, a company specialising in trust management: the majority of trusts are at risk of being successfully challenged.

Monday, January 8th 2007, 3:53PM

by The Landlord

There are some common trends emerging. The top five trust issues identified in 2006, Maxwell said, are:
·   Not all trustees are involved in decision making
·   Formal trustee meetings are not being held
·   Trustee decisions are not being recorded in writing
·   Gifting is not being completed either on time or at all
·   There is widespread intermingling of trust and personal and/or company finances

Any one of these issues, he said, is “like a beacon” to those wanting to challenge a trust. They tell the would-be challenger that there are chinks in the armour and therefore further investigation is warranted. It is this further investigation that uncovers the ammunition the challenge needs to be successful.

“More often that not those looking to challenge a trust will give up early if the basics are done well,” Maxwell advised. The basics include all trustees taking an active involvement in trust matters and the keeping of good trust records. In particular, the keeping of good trust records will provide the evidence of sound management that will see off many of those would-be challengers.

Many of those who have purchased trusts over recent years have not been informed of their obligations after the trust has been established and this has led to the current situation where anecdotally around 75% of trusts are at risk of being challenged; many for the reasons highlighted above.

The results of the Integrity Trust online ‘Trust Bust Test’ suggest that 72% of trusts have at least some risk, with 22% being at serious risk of a successful challenge. “This is something trustees need to start taking seriously if they are to avoid potentially expensive personal liabilities,” warned Maxwell.

“Trusts are a fantastic way to protect one’s assets from future adverse events, but only if managed correctly, and the evidence certainly suggests the majority are offering little protection currently.”

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