Asiaciti Trust Podcast Exclusive — Trusts: What You Need to Know
Recently Asiaciti Trust’s Ross Belhomme sat down with Peter Triggs, former MD and Head of Regional Wealth Planning at DBS & Citibank, for an exclusive podcast on the Tigerhall media platform. The subject was the importance of establishing trust for the legal management of wealth.
A trust is an arrangement where an individual places asset titles and property in the hands of a third party (a trustee). The trustee’s responsibility is to ensure those assets are properly distributed to the individual’s beneficiaries at an appointed time. Trusts are used to put assets under legal protection, keep paperwork to a minimum, and limit tax exposure.
As Triggs mentions in his podcast, trusts have existed for 800 years. To this day, they’re still vehicles that affluent families use to protect their holdings and secure the prosperity of future generations.
During their interview, Asiaciti Trust’s Belhomme outlines why trusts remain essential in the digital era.
Wealth Creators Don’t Always Plan Ahead
Belhomme brings up that many wealthy individuals experience unusual problems in their “success journey.” In working hard to establish their fortunes, they may overlook the need to set up their families or beneficiaries for the future. This oversight can be problematic, even tragic.
“I had a doctor who was very successful and made many millions,” Belhomme says. “But then he lost it all as he tried to manage the investments, and he didn’t have the skillset for that, although he was very good at healing people. And he ended up dying of a heart attack because of the stress that it caused.”
Indeed, great wealth doesn’t exempt families from challenging life events—divorce, lawsuits, family disputes, or business failure. Any of those factors can wipe out assets, even those that have been in the family for decades. For that reason, wealthy individuals need to set up a solid relationship with trust advisors.
“You are never too young to plan,” Belhomme says. “The world is more and more complicated… You need to be very, very slow building the right ecosystem around you.”
When to Bring a Trustee In
Some families are reluctant to solicit outsiders for help in their private financial affairs. Their hesitation is understandable. But sometimes, an objective third party can offer the best solutions for long-term financial management. The legal issues and paperwork surrounding wealth have only gotten more complicated. The job of a trustee is to manage those responsibilities so the family doesn’t have to.
Many families balk at the fees that a trustee charges. They wonder if the value of their assets is large enough to warrant the expense. Belhomme says there’s no cut-and-dried answer and offers a few insights.
“As a ballpark, the benefits of high-level structuring kick in around the $5 million mark of assets… But really, it’s a case of cost-benefit analysis. It’s going to cost you about $8,000 to have some sort of legal structure of a good advisor. While that might seem a lot to add to your annual spend, it’s really a case of you looking at your cost-benefit, your legal spend. So, therefore, it might be that you need a trust for a way smaller amount.”
A Long-Standing Tradition and an Uncertain Future
The trust structure has a long and complicated history. For that reason, it bears an old-fashioned, outdated image. But according to Belhomme, families are still rushing to implement trust arrangements for many reasons.
One is that wealthy families are more spread out across the globe. They may live in countries with drastically different policies on taxation and wealth management. That necessitates the need for a solid legal team to protect international exposure to family assets.
“Virtually every wealthy family has a child in the UK or US studying, which are two very, very strong tax touchpoints,” Belhomme says. “Do take advice, do speak to the right people, do try and learn and understand what’s going on, and have a constantly evolving plan.”
Trusts have a few doubters in contemporary society. While common-law countries respect the viability of trusts, some jurisdictions in other countries don’t recognize the arrangement. According to Belhomme, the trust industry has also been critically slow in adapting to the digital world.
Still, those issues don’t overshadow the need for planning and administering family wealth. Belhomme says the future benefits of a trust justify the time and expense it takes to set up. Indeed, it may be the key to preserving prosperity and avoiding devastation.