Transferring a trust to a new trustee: A strategic option for HNWIs

In this article, Andy Bailey, Head of Private Wealth, explores why and how to transfer a trust to a new trustee, the benefits it offers, and what high net worth individuals (HNWIs) should consider throughout the process.

Why transfer a trust to a new trustee?

Trusteeship is an integral part of managing complex wealth, and while trustees are bound by a fiduciary duty to act in the best interests of the beneficiaries, circumstances often change. Whether due to shifting financial goals, personal relationships, or the evolving complexity of wealth management, HNWIs may find it beneficial to appoint a new trustee. Here are some common reasons:

• Sophistication and expertise in asset management

HNWIs often have diverse portfolios that include not only liquid assets like stocks and bonds but also real estate, private equity, art collections, or even family businesses. The expertise required to manage these assets effectively can be highly specialised. If the current trustee lacks the necessary skills or experience, especially in global investments or niche assets, it may be time to seek out a trustee with more appropriate expertise.

• Better personal service and engagement

Trustees are not just financial managers; they play a significant role in stewarding wealth for future generations. For HNWIs, having a trustee who understands their unique financial goals and family dynamics is critical. If the current trustee lacks responsiveness moving to a trustee who provides a more personalised, high-touch service can lead to greater satisfaction and trust in the management of the assets.

• Jurisdictional and regulatory advantages

With the global mobility of HNWIs, you or your beneficiaries may have moved to a new country with different tax laws and regulatory frameworks. Transferring your trust to a trustee who understands jurisdictional obligations when it comes to tax and regulation and can help simplify compliance with local laws can be hugely advantageous.

• Changing family or business circumstances

As families grow and their financial needs evolve, trustees must adapt to new circumstances. If your family has expanded or there are new business ventures to consider, the existing trustee may no longer be the best fit. A trustee with experience in intergenerational wealth transfer or managing family-owned businesses might offer better solutions for your family’s evolving financial landscape.

• Market consolidation and continuity concerns

The trust market is seeing significant consolidation, with many trustees being acquired by larger firms, leading to disruptions in service quality and a loss of personal relationships. For HNWIs seeking stability and consistent service, moving to a trustee that is independently/family-owned can provide long-term continuity and a more personalised relationship management approach. These trustees often have a vested interest in maintaining strong, lasting client relationships.

The process of transferring a trust is easier than expected

For HNWIs, the prospect of transferring a trust may seem like a complex endeavour, but the process can be straightforward, especially with the right advisors. Here’s how it generally works:

• Review the trust deed and legal requirements: Consult the trust deed to understand the terms governing trustee replacement. Most trust deeds include provisions that outline the process for appointing a new trustee. Some may require the consent of beneficiaries or a protector, while others may provide broad discretion to the settlor.
• Consult advisors and stakeholders: Before making any decisions, it is essential to consult with your legal, tax, and financial advisors. They will help assess any potential legal or tax implications of moving the trust to a new trustee, particularly if the transfer involves cross-border assets or multi-jurisdictional considerations.
• Appointing the new trustee: Choosing a new trustee is arguably the most important step. For HNWIs, the decision should be based on a trustee’s ability to manage complex asset structures, their understanding of global markets, and their approach to family governance and succession planning. Boutique trust companies are often preferred by wealthy individuals because they offer a higher level of service and a bespoke approach.
• Prepare the legal documentation: Once the new trustee has been selected, a Deed of Retirement and Appointment will need to be drafted to formalise the transition. This document specifies the outgoing trustee’s resignation and the appointment of the new trustee. Your legal advisors will ensure that all documentation is in order and compliant with the trust deed and local laws.
• Transferring assets: Transferring the trust’s assets to the new trustee may require coordination with financial institutions, asset managers, or other parties to ensure a seamless transfer. Additional steps may be required if assets are in different jurisdictions to comply with local laws or regulations.

Key considerations for High Net Worth Individuals

As with any significant financial decision, there are several important factors to keep in mind when considering a transfer of trusteeship:

• Legal and tax implications: A transfer can trigger tax liabilities, especially in cross-border cases, so consult tax professionals to plan accordingly.
• Trustee reputation: Ensure the new trustee has the expertise and reliability to manage large estates as well as a consistent and responsive approach to relationship management.
• Long-term flexibility and stability: You want a trustee who can evolve with your financial and family circumstances over time. Choose a trustee who can adapt to changing circumstances and family dynamics and have a solid ownership structure behind them.
• Costs of the transfer: Weigh legal fees and transfer costs against the long-term benefits of appointing a more capable trustee. At Belasko, we can make the transition seamless, fill any gaps you’re experiencing with your existing trustee, at a competitive cost.

A strategic move for wealth preservation

For high-net-worth individuals, transferring a trust to a new trustee can be a strategic decision that enhances the management and protection of wealth. Whether you are seeking better expertise, more personalised service, or a trustee with jurisdictional reach, the process of transferring trusteeship is easier than many might think.

As an independently owned business, our private wealth team are reliable, experienced and provide continuity and longevity in building relationships. Our bespoke private wealth solutions draw on the many years’ experience of managing the needs of HNWIs. We collaborate with your advisors, act as professional trustees, and ensure effective management and administration of the trust. We can ensure a seamless and smooth transition of your trust, at a minimal cost, which will also be a valuable step toward safeguarding your legacy for generations to come.

If you’d like to discuss transferring your trust, get in touch with Andy Bailey ([email protected]).