At a recent trust conference in New York one of the speakers made the controversial statement that families have been turning to Private Trust Companies “because they could not find any good choices to appoint as their trustees!”

I recently attended the IIR trust conference in New York. The conference is co-chaired by the formidable duo of Bob Lawrence of Cadwalader Wickersham & Taft LLP in New York and Mark Bridges of Farrer & Co in London. Bob and Mark have been consistently successful at attracting speakers and attendees of the highest calibre within the trust industry from both sides of the Atlantic. Their conference, in my opinion, is the best of its kind held in the Americas. At the conference, in the context of a presentation on private trust companies, Barbara Hauser, a lawyer well-known and well-respected in the area of family trusts, and now a director of the Stanford Group, in Zurich made the controversial statement that families have been turning to Private Trust Companies “because they could not find any good choices to appoint as their trustees!” Ms Hauser went further to explain that: “If any person was qualified to be a competent trustee, it is unlikely that that person would ever agree to act as one!” A very interesting thesis. Let’s put Ms Hauser's hypothesis to the test. What exactly does it take to be a “competent trustee”? First, let’s look at educational and professional background - at a minimum the person would need to have a good to excellent grounding in trust law and in legal matters generally. In addition, the person needs to be numerate enough to read and understand financial information. Being an accountant and/or an investment professional would be ideal. What about business experience? While the person need not necessarily be an entrepreneur or corporate finance professional, having a successful business approach would be a big asset, certainly for trusts that own private companies or investments in private equity. What about integrity and financial strength? Certainly, you would probably not want your trustee to be a previous bankrupt (that would cut out a lot of the successful entrepreneurs as well). While it is self evident to say you would not want a “known criminal”, you would probably shy away from those who have had a series of litigious problems as well. At a minimum, you would want someone who would tell you about their previous legal issues and be able to explain them. As the trust beneficiaries may want to be able to successfully sue the trustee (since a “trust” is not a legal entity in itself), ideally you would want someone “worth suing” which means that the person should have enough personal wealth (or professional insurance) which would assure you that legal misdeeds could be successfully collected. The trust and its beneficiaries may have all sorts of issues in respect of banking, investments, real estate, insurance and taxes, as well as personal issues that can encompass citizenship, moving jurisdictions, marital matters, health or psychological issues. The trustee cannot possibly be expected to be an expert in all of these disciplines too, but it would be very useful if he did have a network of contacts in these areas from which he may be able to draw on expertise from time to time. On the personal side, one would ideally want the trustee to have sufficient age and experience to be able to exercise authority over the beneficiaries (particularly children and grandchildren in the absence of parents) and gravitas in respect of the professional dealings. Also, it is better if this person is already well-known to the family and could take into account the particular family situation and personalities; although being “too close” may cause difficulties as the trustee should by definition, be even-handed in dealing with all beneficiaries and not exercise any favouritism. One would want the person to be decisive and transparent as well in his dealings. We would not want the person to be evasive or referring constantly to outside professionals. The ideal trustee will also need to be accessible and free enough from his other business obligations (or have the administration support) to take an active interest and deal with the administrative requirements on an on-going basis. Then of course the trustee will need to live in the “right jurisdiction” as tax efficient trust management may require the trustee to be resident in an appropriate tax neutral jurisdiction. It may not be possible for an international tax sensitive trust structure to be managed on a tax efficient basis from Mayfair or Park Avenue. Now, how much should we pay this mature, honest, solvent, well-insured, legally and accounting trained person with a nose for business, who is a close friend of the family, living in an appropriate tax haven? How much do you think he will ask to act as trustee given that he knows that he will be the first in line for criticisms for any and all perils that may befall the trust assets? What kind of trustee fee would it take to attract the qualified candidate to take on those responsibilities? Would you be willing to pay that amount? Perhaps Barbara Hauser has something here. Any one person qualified to act as trustee would indeed never agree to act as one! I accept that Barbara’s proposed solution of a private trust company, is one solution, recognising that the PTC itself is not guaranteed to meet all of the criteria of the ideal trustee. But I for one have not given up on the traditional solution to cover the wide range of quantifications that make up the ideal trustee – the trust corporation. I accept the criticism of corporate trustees for being the soul-less substitute of a “in the flesh” trustee, but if chosen wisely and with care, the corporate trustee can, as best as possible, meet the considerable criterion that is required.