As usual, a transcript of the presentation for those that cannot (or choose not) to view the presentation is below –
The issue in relation to when the traditional master trust might not in fact be entirely commercial is probably very similar to many other issues in this area in so much as there's a myriad of reasons why it might not be entirely sensible.
Three common themes that I would probably encourage people to keep an eye out for would be – firstly, that the overall value of the estate just doesn't justify any form of testamentary trust.
In other words, the ongoing administrative cost and the actual costs to actually set the structure up just don’t make it economical, and part of it might be that because the will makers’ are ultimately wanting to spend the kids’ inheritance, so they're actually going to make sure that it's all gone in the first place.
That would be the first category.
The second category would be what we would describe as an estate where there is ‘enough wealth to be dangerous’ – so in other words, not wanting to put any actual numbers around it, but if there are, say, ultimately 3 or 4 children that are going to take a benefit, but the overall portfolio of the estate makes it unwise to be trying to lock that into one particular structure, and it would be in fact better for everyone concerned that they each get their own piece of the pie as it were, then that can be another big reason to sort of trend away from master trusts.
That can often be driven not just by the financial numbers involved, but also practically, if you've got children spread all around the world, it may not be the absolute smartest thing to be trying to lock them into one structure.
The third big reason tends to be actually at the other end of the scale where you've got significant wealth involved, serious wealth involved, and you've got the will maker sitting there and saying look, at the end of the day, while we're very happy to have the master trust as a big part of what we're trying to achieve here, we need to be able to allocate some money off directly to the ultimate beneficiaries. So that they actually can have something they can touch and feel - I guess it's called the ‘beer money’ trust on the side.
In those cases, it's not so much that the master trust is uncommercial overall, it's more that if you only had a master trust, that would be an unwise way to go in a particular set of circumstances.
Until next week.
The second category would be what we would describe as an estate where there is ‘enough wealth to be dangerous’ – so in other words, not wanting to put any actual numbers around it, but if there are, say, ultimately 3 or 4 children that are going to take a benefit, but the overall portfolio of the estate makes it unwise to be trying to lock that into one particular structure, and it would be in fact better for everyone concerned that they each get their own piece of the pie as it were, then that can be another big reason to sort of trend away from master trusts.
That can often be driven not just by the financial numbers involved, but also practically, if you've got children spread all around the world, it may not be the absolute smartest thing to be trying to lock them into one structure.
The third big reason tends to be actually at the other end of the scale where you've got significant wealth involved, serious wealth involved, and you've got the will maker sitting there and saying look, at the end of the day, while we're very happy to have the master trust as a big part of what we're trying to achieve here, we need to be able to allocate some money off directly to the ultimate beneficiaries. So that they actually can have something they can touch and feel - I guess it's called the ‘beer money’ trust on the side.
In those cases, it's not so much that the master trust is uncommercial overall, it's more that if you only had a master trust, that would be an unwise way to go in a particular set of circumstances.
Until next week.