Succession Planning – The Role of Trusts

Trusts are extremely popular for succession planning and wealth preservation and this is for good reason given the various advantages they offer, several of which are outlined below.

Trusts are extremely popular for succession planning and wealth preservation and this is for good reason given the various advantages they offer, several of which are outlined below.

A Trust is a ‘fiduciary’ relationship where the owner of an asset (The Settlor) may pass ownership to another party (The Trustee) for the benefit of a third party (The Beneficiary). Trusts effectively differentiate between a person owning something in a legal capacity and a person having a ‘beneficial’ ownership of something. A fiduciary is a person, or organisation like Boston, that has the power and obligation to act for another (the beneficiaries) under circumstances that require trust, faith, and honesty.


Trusts are a quirk of the English legal system stretching back to the 12th Century, known as equity, which was developed alongside the system of ‘common law’ and was primarily focused on rightful ownership of land. There are, nevertheless, several English-influenced offshore and onshore jurisdictions in which trust law is very highly developed, with one of the most prominent examples being the Isle of Man.

In regions where people are not familiar with trusts, one of the first questions we are always asked is ‘why on earth would I give my assets away?’ This reaction is entirely understandable, of course. So, the first point we always make is the history of the trust in English Law, and with that history comes the security and certainty of a proven and established concept that can be legally justified based on the masses of case law. For us here at Boston, it’s something we have a very deep understanding of.

When we’re working with families we are rarely discussing tax issues as a reason for the creation of a trust. Instead, it is much more about organising the assets and wealth. Many successful families struggle to keep a handle on their wealth and assets which is where a trust can sweep it all into one structure that holds the assets for the benefit of the documented beneficiaries.

In many countries, there are laws governing ‘forced heirship’, meaning the owner of the assets may not be able to decide who to leave them to. A trust overcomes that because effectively the owner has given away their wealth, irrevocably, before they die. The trustees will then administer and control the trust, taking into account the settlor’s wishes. It is very important to understand the trust is in fact a binding obligation in law.

International Jurisdictions for Trusts

The jurisdiction where the trust is held is another key consideration. You should always look to create a Trust in a jurisdiction where the concept is widely understood and regulated and can successfully call upon and utilise proven case law. The Isle of Man is an obvious choice as it is widely considered one of the best regulated, and respected, offshore jurisdictions with close links to the United Kingdom.

Clients using the Isle of Man can also have confidence in the oldest parliamentary system in the world with a stable economic and political infrastructure. Even then, trusts can include a flee clause, allowing the trust to move jurisdictions for the purposes of administration and overarching law in light of serious, catastrophic events.

Some clients may include a ‘protector’. This is generally someone well known to the family, often a legal or financial adviser, who can retain certain powers of veto meaning the trustees would have to go to the protector for approval. This can give the settlor (the person giving the asset away) additional comfort knowing that whilst they cannot influence decisions, they have a trusted person within the trust. However, clients who are familiar with common law usually see this as unnecessary and something that could delay the decision-making process.

A trust settled in the Isle of Man is under the jurisdiction of competent and respected regulator. In addition, all regulated trust companies will carry a mandatory level of professional indemnity insurance, although it is important to stress that the trust company administering the trust does not own the assets and they do not form part of their own balance sheet. This is where the collective expertise of the company, and the trustees, plays an important role and Settlors need to carefully choose their trustees.

There is nothing more effective than a trust in the structuring of estate planning. The key part of this structure is down to the trustees to make it as robust as possible, which is one of the reasons the company, and the expertise of its people, is so important for the family.