In part 1 of this series of blogs on private and other non-pension trusts, we looked at the origins of trust law and the basic concept of trusts, which is simple - someone (the settlor) gives property of any kind to one or more persons (the trustees) to hold for the benefit of others (the beneficiaries).
In this part 2 we examine some of the uses of trusts. And there’s nothing like giving examples of some of the private trust arrangements for which we act as trustees to show how trusts can be utilised.
- Family protection. One of the most obvious uses of trusts is in providing for children, whether just because they are minors or under a disability or because their parents do not want them to have access to their assets until they are older. For example, a standard clause in the wills of many parents with minor children is to provide for the creation of a discretionary trust on the death of the second of the parents to die.
When parents with young children write their wills, they will probably have no idea how their children will turn out and whether, and indeed when, they will be capable of looking after assets, whether significant or otherwise. So, they leave their estates to trustees to hold for their children. The trustees can then decide what the children get and when, so they can, for example, withhold assets from a profligate child or perhaps an older child who makes a bad marriage. Or, indeed, they could advance assets to a child should a particular need arise.
- Wealth preservation. Another common use of trusts is to preserve wealth across generations. This used to be more common, but tax rules have changed and made it more difficult to have these types of trust because of the taxes imposed. In some situations, though, trusts can be used to preserve wealth long-term.
- Court-ordered trusts. The UK courts sometimes make awards in personal injury cases on the condition that the funds are placed in a trust for the benefit of the successful plaintiff, even if that plaintiff lives outside the jurisdiction, such as in Ireland. This may be where, for example, the plaintiff is a minor or suffers from a disability. They may specify that an independent trustee be engaged to ensure that the interests of the plaintiff are served at all times. We have not come across this practice in the Irish courts, although there is no reason in principle why such an order could not be made here.
- Pension death benefits. One of the trickiest decisions that pension trustees can be faced with is how to pay out death benefits from an occupational scheme. There may be competing interests or the obvious beneficiary is a minor or, as with court-ordered trusts, under a disability. In one case trustees of a pension scheme of a multi-national employer wanted to pay the benefit out to a young child, but they could not decide who would be best placed to hold the funds for the child, so we were appointed as an independent trustee along with family members.
We do, in fact, act as trustees of trusts in all the above situations. Of course, it is not always necessary or appropriate to have independent trustees. The scale of assets may not justify it or the trust might be simple and short-term. However, there are situations where it is critical or necessary. In those situations, we are happy to step in.
In part 3 of this series, we will consider the use of trusts in commercial transactions, such as trusts to ensure commercial anonymity, security trusts, share schemes and the like.
If you would like further information on private or commercial trust arrangements, please contact Jeremy Mitchell in ITC Consulting at firstname.lastname@example.org or call 01-661 1022.
*Please note this content is the view of the author and not of Independent Trustee Company