What to expect from the family trust.
“Trusts has no value to Millennials and Gen X. For them it has become an obstacle to their wealth and they don’t understand why they can’t have it now.” That was a statement by a client that prompted me to consider the usefulness of a trust as a vehicle to transfer wealth to future generations. If the future generations can’t see the value in keeping the family wealth safe and secure, is the trust still of use?
We know how useful trusts have been and that it have been used for centuries to protect and safeguard wealth that is transferred from one generation to another. Even in our modern and progressive society, it remains functional and provide families with value and security.
If the trust is still functional, why does the upcoming generations perceive it to be a nonsense and a bother?
The answer is not simplistic and certainly not a solution to all upcoming generations and all wealthy families. What is needed is to do things differently, to considering different approaches, to breaking with the old and embracing the new, something trustees struggle with.
The solution lies in improving the relationship the family has with their trustees, not only the relationship between the wealth creator and the trustees but each generation and the Trustees. In turn, the trustee should respond appropriately and show an interest in each generation, getting to know what the family is about, their purpose, their hope and their dreams. In order for the trust to be of value to the rising generation, the individuals family members has to see and experience the value it adds to their lives.
The trustee is not the source of income for the family but rather a contributor and enabler to achieve the family’s purpose.
What can the family do to encourage their trustee to take a greater interest in their lives? Here are a few pointer:
- Communicate with your trustee
It can be difficult for a trustee to stay abreast of changes in the family if the trustee act on multiple family trusts. Arrange regular meeting to update the Trustee on life events that has taken place in the family. It is also healthy to have annual meetings where the cash requirements of the family for the coming year is discussed.
- Understand the confines of a trustee, legal and the trust documents
Ask the trustee to train the family on the legal documents that rule the trust and what their constraints are. Having an understanding of what can and can’t be done helps communication to be clear and avoids frustration and conflict.
- Ask for fixed fee to promote communication
Make sure you understand how the fee structure of the trustee works. Sometimes their charges is based on the amount of time they spend on a matter or enquiry. Ask the trustee to consider fixed fees. That is where a specific fixed amount is charged irrespective of the amount of time that is required by trustee.
- Family policies and process to align with that of the trustee
Try to align family policies and procedures with those of the trustee. It makes communication easier and avoids duplicating time and wasting time on questions that could have been avoided.
- Create an appropriate expectation in the family
Communicate regularly with the family of what is to be expected from the trustee. The trustee is a friend and advisor to the family and is helpful. Knowing what to expect avoids frustration and conflict.