Dirty laundry

Trusts are back in the news and under attack, but it's not down to a tax avoidance scheme or corporate tax evasion scandal.

The Earl of Cardigan, David Brudenell-Bruce, is continuing his ?long-running battle with the trustees ?of his family estate, Savernake in Wiltshire, seeking to remove them ?and prevent the sale of the estate's ?Grade I-listed 19th-century Palladian mansion, Tottenham House.

It's easy to see why the press would take so much interest in a bleak tale about feuding families and their crumbling fortunes: the Earl is living ?off benefits in a rundown cottage on ?the estate and expecting his third ?child, according to reports.

But I worry about the effect that such isolated examples have on the public's perception of trusts and their importance for many 'ordinary' families. HMRC statistics show there are more than 179,000 private trusts submitting annual tax returns. The vast majority of these will be well-run structures, which will legitimately protect the interests and assets of those for whom they ?were created.

If nothing else, the Earl's story reminds people about this protection of assets and beneficiaries - and that choice of trustees is crucial.

Ideally they will be trustworthy, ?honest and have some experience of financial matters - although it is neither expected nor desirable for them to rely solely on this knowledge. Significantly, they should be able to judge when it's time to take independent professional advice on matters that arise during ?the trust's lifetime.

Trustees should be able to communicate openly and effectively with beneficiaries and, where necessary, other third parties, while always having regard to both their duty of care ?owed to the beneficiaries and their ?duty of confidentiality.

Sometimes acting as a trustee in complex trusts, or where there are difficult family circumstances, is a thankless task and real exercise in diplomacy. Trustees must be approachable yet robust in upholding the trust's principles. Of course, family members or close friends may have a better understanding of background, internal politics and individual personalities. However, they could find it more difficult to remain detached, dispassionate and resolute.

Therefore, it is imperative that appointed trustees, lay or professional, understand the full extent of the role they've undertaken and their duties to act in the best interests of the beneficiaries. They must sometimes stand in the shoes of the person who created the trust, even if that means taking the flack from disappointed individuals who thought they were entitled to benefit.

Out of control

Savernake was transferred into trust in 1951 by the current Earl's grandfather and father, who were apparently haunted by tales of the dissolute ?4th Marquess, and wanted to protect the estate from being destroyed by their heirs. It was Lord Cardigan's father who handed over control to the current trustees when his son was in the US ?for two years.

It's impossible to say in this ?situation whether anything could have prevented a falling out with the trustees. Certainly communication between trustees, beneficiaries and the wider family is vital. If everyone understands the reason and need for the trust, they are more likely to cooperate, but this is never guaranteed.

Also, professional trustees are permitted to charge reasonable fees ?for their time, which can be frustrating for feuding beneficiaries, who fail to appreciate how their behaviour impacts on such costs.

The Earl was unsuccessful in ?his previous action against the trustees in 2012, when the High Court ruled against his attempts to prevent a sale ?of 25 paintings belonging to the ?estate. The trustees are clearly in ?a cash-poor situation and must ?generate funds to support the crumbling estate and protect what's ?left for future beneficiaries.

The latest case is due to be heard ?in the High Court in December.

 

Nicola Plant is a private client partner at Pemberton Greenish