The role of a trustee is an increasingly onerous one. This article, written by a senior figure at Saffery Champness, examines what it takes to be a good trustee in the modern world.

Why would a person be a trustee today, given the sheer amount of red tape involved? It is a question many of those who are involved in this sector must ask themselves, or be asked by those who have been approached for the role. This is clearly a problem: one cannot have trusts - an important structure - without trustees. Helen Green, director of Saffery Champness in Guernsey, addresses the question. As always, the editors invite readers to respond.

Modern trustees have a difficult task. They are essential in helping clients manage and protect legitimately acquired wealth but the role has become increasingly regulated and demanding. 

Trustees have a professional duty to act impartially among the beneficiaries of a trust in accordance with the framework of the trust documentation and the prevailing law. The prudent exercise of this requires a unique skillset that draws as much upon experience and qualifications (many trustees are qualified accountants or practising lawyers for good reason) as on the personal qualities of would-be trustees.

Indeed, this is well illustrated in Guernsey trusts law, where “a trustee shall… observe the utmost good faith and act en bon père de famille”. This nod to the Norman law foundations of Guernsey’s legal system arguably makes the role even more onerous. The standard to which one might run their business affairs is probably less demanding than that expected of a good father (or mother) raising children.

With a husband, two daughters at university, a border collie and a cat, I find family life a welcome respite from some of the treacherous waters of internecine and intergenerational conflict that can come up during the working day. Families large and small, wealthy or poor often fall in and out of love with each other. 

Once, I was a trustee of a family trust where the relationship between parent and eldest child had broken down. This made the partition and enjoyment of assets held under trust almost impossible. Each party retained their own legal advisors and rejected every request of the other. The wider family also had views. A “bon pere” (or “mere”) might have been driven to resorting to corporal punishment when every action was scrutinised and met with voluminous correspondence from various aggrieved parties.  

Does the trustee clam up, remaining impassive in splendid isolation, avoiding direct contact and hiding behind their own lawyers? 

Absolutely not, communication is key and must be clear and effective. A prudent trustee will take advice where necessary and act decisively. In extreme situations a trustee may apply to the court for directions, which could lead to their retirement or at least the partition of assets and appointment of new trustees. The ability to separate oneself from the emotional component and act in the best interests of the beneficiaries as opposed to those that shout the loudest is a critical skill. 

A recent trend in trust activity has been a return to the original purpose of preserving family assets for successive generations. Trustees thus have to manage the very real human and emotional issues that necessitate the creation and careful administration of a trust. With an internationally mobile client base, we often see cultural challenges between the grandparents’ view of the world and their grandchildren, educated overseas, unmarried, in relationships that would be frowned upon at home, perhaps carving out a successful niche for themselves. 

Rather than being a restrictive device designed to thwart the ambitions of younger generations (especially where the oldest child may be female) appointing experienced professional trustees can add balance and perspective. It can further the aims of immediate beneficiaries whilst also protecting them from the totality of the family wealth. 

Providing reassurance is a fundamental and often under-acknowledged trustee duty. Clients require understanding and sometimes compassion. Being a gentle, yet firm voice of reason is what distinguishes a great modern trustee. 

Media headlines have put the spotlight on international finance centres but clearly there are individuals and families who use offshore structures in reputable jurisdictions for entirely legitimate reasons. These can include succession planning and asset protection, investment, philanthropy or basic confidentiality, particularly for those from countries where the rule of law is less than well established. 

A good trustee is always able to see the proverbial wood for the trees. They can help the client identify the most appropriate jurisdiction, establish the right structure and ensure it remains relevant to achieve the best results for the family in times good and bad. In some ways a good trustee is rather like a good parachute – you never really find out how good your parachute is until you come to rely upon it and you pray that you will never have cause to.   

Balancing act
A trustee must carefully balance the short-, medium- and long-term considerations. Beneficiaries often include minors and unborn children so the pressing needs now must be managed with one eye on the future. 

Trustees must exercise powers of investment (and monitor the performance of investments) in order to ensure the trust assets are providing a sufficient return within an acceptable risk profile. With tangible assets such as property, antiques, fine art, classic vehicles, or wine, the prudent trustee must ensure these are appropriately managed and custody arrangements are periodically assessed for fitness of purpose and performance. 

There is considerable activity amongst litigators in all major trust jurisdictions where the trustees of trusts set up to ostensibly benefit children and grandchildren are challenged by those same children and grandchildren because the trustee slavishly followed grandpa’s instructions with little regard to the actual purpose. The consequences for the validity of the trust and the trustee who should never have favoured grandpa over the now-angry beneficiaries are usually dire. 

The ability to maintain perspective is essential. Clients can feel overwhelmed by continued headlines, be they about international tax transparency or the latest example of a family fighting publicly and embarrassingly over money tied up in a trust, where the trustee is paralysed by fear of making the wrong decision or worse, thinking about their own position not the beneficiaries. A sophisticated, experienced trustee has the breadth of knowledge to know what has come up before, to identify and deal with matters before they escalate out of control. 

The role of a trustee is a wide-ranging and sometimes ill-defined mix of duties, responsibilities and challenges. It has become more difficult than ever as more complex and more globalised family structures create new challenges – and the media spotlight adds to these. Those that choose wisely and communicate frankly and effectively will reap the benefits in valued enduring client relationships for many generations to come.