Skandia International, part of Old Mutual Wealth, said 22% of advisers had experience of a trust arrangement ending in dispute in these situations.
“The role of trustee carries with it significant responsibilities,” said Paul Schrijver, international specialist for Skandia international. “People who appoint family members as trustees may not be aware of the burden they are placing on them and the risk of family conflict they are creating.”
The company explained that there are “a couple of alternative options that can greatly help advisers and their clients”. This includes setting up a protector on the trust, appointing a corporate trustee to manage the trust – or a combination of the two.
Skandia said it is often believed that appointing family members as trustees is the obvious choice, because family members are those closest to them and they believe they will ensure their wishes are carried out on their death.
However, what can often happen is that upon the death of the settlor, the family members can start to fall out and may not see eye to eye on how assets should be distributed to beneficiaries.
The company explained this is because family members are emotionally attached to the situation and may have vested interests, so may find themselves in a position where they have a conflict of interest. If they have to take a vote on an action and they are split, there is no easy way to resolve the dispute as they must all agree in order to carry out an act.
“Using a corporate trustee can help relieve this burden, and setting up a protector can give valuable reassurance to the settlor that a family member or other third party such as a solicitor, will have the legal power to oversee the trust on their behalf,” Schrijver.
