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| Case Studies - Case Studies |
Summary:We developed a comprehensive financial plan for a trust, which satisfied the trustees’ need to diversify assets and look after the interests of the beneficiaries in a tax efficient manner. See also our guide to trustee investment. Background:Following a referral from a local solicitor, we were introduced to the trustees of a newly created trust. The trust had been set up following the death of the father of two of the trustees and the third trustee was a friend of the family. The solicitor was advising the trust on the legal aspects of their duties and their inheritance tax position but was unable to give financial advice. The trust had been set up for the benefit of various family members and the trustees required advice on how best to fulfil their responsibilities to look after the interests of the different categories of beneficiaries. Problems/Challenges:The Trustee Act 2000 sets out a number of duties and responsibilities for trustee investment such as the duty to diversify assets, take professional advice and look after the interests of beneficiaries. Since the Trust had complex aims, the trustees needed advice on the most appropriate product and investment strategy for the trust money. The trust needed to balance the need for income of some beneficiaries while securing the future capital for others. They also needed to keep the trust money invested in a diversified way to generate the best long-term returns for the trust. As part of this an ongoing review was necessary. Our Approach:We met with the trustees and the solicitor to establish the aims of the trust and the strategy for investment. We developed a financial plan for the trust, building on assumptions made about investment growth, income taken and the effect of tax such as inheritance tax. This gave the trustees an overview as to how the trust investment should develop over time. Following this, we established a risk profile for the Trust investments and built a portfolio of assets to aim to generate an acceptable level of income whilst growing the capital. As part of this we recommended an investment vehicle to deal with the tax position of the trust whilst giving maximum flexibility. Outcomes & Impact:By working with the solicitor we were able to create a unified approach so that advice was consistent on the legal and financial sides. We were also able to refer the trust to a local specialist accountant, who could advise them on their requirements to liaise with the Revenue. The trustees were able to satisfy their duties to look after the interests of the beneficiaries by taking specialist financial advice and diversifying the portfolio. Because we created regular reports for the trustees they were able to demonstrate their compliance with their duties, meaning that they were less likely to come into conflict with the beneficiaries at a later date. Continuing Support:Each year we schedule two reviews with the trustees. The first will be to re-evaluate the trust’s financial situation and revise its financial plan so that we can take into account any changes to its circumstances and re-assess whether it remains on target to meet its long-term goals. The second meeting reviews the trust’s investment portfolio and aims to keep it on track towards its goals while taking the least risk needed to do so. Further Information: |
