What are Trusts for

Trusts are set up for a number of reasons, including:

  • to control and protect family assets
  • when someone’s too young to handle their affairs
  • when someone cannot handle their affairs because they’re incapacitated
  • to pass on assets while you’re still alive
  • to pass on assets when you die (a ‘will trust’)
  • under the rules of inheritance if someone dies without a will (in England and Wales)

The main types of trust are:

  • bare trusts
  • interest in possession trusts
  • discretionary trusts
  • accumulation trusts
  • mixed trusts
  • settlor-interested trusts
  • non-resident trusts

What is an Investment Policy Statement

  • A requirement of The Trustee Act 2000 is that an Investment Policy Statement should be prepared for all trusts. This should have had a major impact on all those involved with the drafting or advisory work on trusts, particularly Trustees.
  • Although the Trustee Act states that the investment policy statement should be prepared by the Trustees, in practice most trustees would struggle to produce an investment policy statement that is practical and fit for purpose and this is where Allen Tomas & Co become involved.
  • The investment policy statement should be drafted primarily to protect the beneficiaries of the trust. So, for best practice the draft should be prepared by ourselves so we can make a clear link to an asset allocation model that is specific to the beneficiaries and benchmarked.
  • An investment policy statement drafted in this manner is a very useful discipline and a very valuable exercise for both investment advisors and trustees, and of course ultimately the beneficiaries.
  • The benchmarking to a widely available index will provide a means for the trustees to regularly check on the investment performance of the trust and the skills of the investment manager.
  • This is particularly helpful when holding annual trustee meetings, as it enables trustees to ensure that the investments are being managed in line with the criteria established.
  • It also enables trustees to “cut through any waffle” and any failure to perform in line with benchmarked asset allocation performance will provide the trustees with detailed information to enable discussion.
  • Allen Tomas & Co often work closely with Solicitors and Accountants in preparing and completing the annual Investment Policy Statement.

FOR FURTHER INFORMATION ON THIS TOPIC, PLEASE CONTACT ONE OF OUR ADVISERS