A Trust may be structured under a proper Law of the Trust which enables the Trust to be migrated to another jurisdiction, as provided for under BVI Trust Law. A Trust may also be structured with a Successor Trustee in another jurisdiction already appointed and with a flee clause pre-determining the circumstances when the Trust is to move). Subsequently, a Trust may be migrated more quickly than a corporate structure. Substantial family and estate planning usually requires effective exit strategies for the structure to be adopted in the first place.
The Trustee has a fiduciary duty to the Beneficiaries which requires that the Trustee act in good faith and in the best interests of the Beneficiaries. The Trustee's fiduciary responsibility to the Beneficiaries is much more demanding than, for instance, that of a Director to the Shareholders of the Company.
From the Beneficiaries' and the Settlor's point of view the role of a Trustee should not be considered lightly. The Trustee legally holds the assets of the Trust and is liable for any breach of trust. Therefore, the possibility of recourse to the Trustee has to be a material consideration when establishing a Trust.
The Trustee's fiduciary responsibilities require that the Trustee manage the assets of the Trust according to the terms of the Trust Deed, maintain records for the assets of the Trust and periodically account for the assets in the Trust to the Settlor and the Beneficiaries. The Trustee legally controls the assets in the Trust but is not allowed to secretly profit in any way from its position and may only recover fees and disbursements as previously agreed under the terms of the Trust Deed.
The usual Trust Deed employed for family and estate planning is the Discretionary Trust, wherein the Trustee determines the actual benefits for nominated beneficiaries or a class of beneficiaries (i.e. all the blood relatives of the Settlor).
Under a Discretionary Trust, no beneficiaries have defined beneficial interests, which may be attractive for tax and asset protection reasons as well as ensuring great flexibility as the circumstances of the discretionary beneficiaries change in the future.
How the Trustee's discretion is exercised can be periodically influenced by the Settlor or his/her nominee through a Letter of Wishes . Provided such Letters of Wishes are in accordance with the terms of the Trust Deed, they are usually followed by the Trustee. A mechanism to protect the Settlor's interests is to have the Trust Deed appoint a Protector, usually a nominee of the Settlor, with the power to serve notice to dismiss the Trustee and appoint a new Trustee. The Settlor and the Beneficiaries thereby retain indirect power to replace the trustee if they are not satisfied by the exercise of the trustee's discretion.
The process to set up a Trust usually involves an interview of the client with a private banker or attorney and then some correspondence: completion of a trust questionnaire and review of the draft Trust Deed by the attorney. The Trust is usually established with a nominal settled sum of US$100 at the time of execution of the Trust Deed. The process to set up the Trust and any underlying investment holding company and bank/brokerage accounts can be accomplished in a matter of a few weeks. |
