Trust in the future
by Bill Blevins, Financial Correspondent
Blevins Franks International


According to three leading UK offshore life offices less than 15% of all single and regular premium business submitted to them is written under trust. Why is the use of the trusts so low? To ignore the tax and estate planning benefits of trusts could be costly for both advisor and client alike.

In simple terms an investment set up under trust avoids the time consuming and often costly probate requirements for beneficiaries in the event of the investors’ death. Probate is also a publicly open procedure, whereas distributions from a trust are entirely confidential. In addition a number of UK and overseas taxes may be mitigated or avoided entirely by the judicious use of trusts. Of equal importance, the laws of succession in many overseas territories, especially continental Europe, prevent the free distribution of assets at death, almost always to the detriment of the surviving spouse – a simple trust can avoid this problem.

In a number of jurisdictions there is a risk of double taxation on worldwide assets at death due to inadequate Double Tax Treaties. For example, the Double Tax Treaty between the UK and Spain does not cover death duties liabilities, although the Spanish will allow a concession to foreign nationals living in Spain which may avoid double taxation – but it is a concession not a right. Rates of succession tax in Spain range up to around 84% in some cases and transfers between spouses are not exempt from tax as in the UK and once again, trusts can be invaluable in this area.

Most major offshore insurance and investment houses offer a comprehensive range of standard trusts and many offer more specialised alternatives, including tax barristers and solicitors to provide advice in this complex area. It’s hard to think of a good reason why all investment assets should not be placed in

Investment product providers, in my opinion, with a few exceptions, need to provide more training in this area to encourage advisors to regard trusts as an essential part of their advice. Often the advisor neglects to suggest an appropriate trust due to either ignorance or laziness – after all he does not normally get paid any more for dealing with all the paperwork associated with setting up a trust to protect his clients assets! Cynical, but true.

Without the tax and estate benefits offered by a suitable trust, both clients and beneficiaries may consider their financial planning advice deficient. Indeed I have recently heard of a case where the beneficiaries of a deceased investor are taking legal action against the advisor who provided the original advice on the grounds that he should have known of the benefits of arranging the investments in trust at outset. The beneficiaries claim that the considerable legal expenses and tax which has been payable on their inheritance could have been avoided and that the advisor was negligent in not advising his client of this risk.

How would you feel if your inheritance was decimated by over 50% because a simple two page document had been ignored as part of the financial planning exercise?

We live in an age of increasing litigation but financial advisors should not be motivated by this risk but rather by the professional imperative of providing best advice, despite the extra paperwork and lack of additional financial incentive.

I’d rather have satisfied beneficiaries than become the subject of legal action by dissatisfied ones. Wouldn’t you? Trust in the future – why not?

If you would like fuller details of how to save tax in France see our website at http://www.blevinsfranks.com and then contact the Partner of the Firm nearest to your French place of residence.

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