Selecting the right offshore Trustees for your structure

Selecting the right offshore Trustees for your structure

Selecting the right trustees for your offshore structure is very important for two distinctive reasons.

The first is that the Trustees will be entrusted to manage your hard earned wealth, assets or business for the benefit of the beneficiaries. Your first priority would be to ensure that it is in safe hands, you are working with a reputable trust company, they are properly regulated by laws and they have the necessary experience, expertise and resources to manage your structure.

Unfortunately it is difficult to know in advance whether a relationship with your chosen trustees will work out until it has been tested over time. It's a relationship synonymous to developing a relationship with your doctor or lawyer. Many families over time have developed a special relationship with their doctor or lawyer to the extent that they trust them with everything and anything. It should be the same with your Trustees.

However, where a relationship with trustees has broken down irretrievably, it could cause unsolicited problems, delays and frustration. The retiring trustees would not transfer a trust to new trustees before all outstanding fees have been paid. This can cause delays especially where the fees of the retiring trustees are disputed. The retiring trustees will also require an indemnity from the new trustees for any potential future claims against the trust during the time they acted as trustees of the trust. Some retiring trustees will deliberately delay the transfer process for no apparent reason at all or could not be bothered despite compliance with all requirements. This could be frustrating especially where the conduct of business is dependant on the offshore board of directors'.

The good news is that there are to a certain extent ways of minimising risk when selecting trustees.

Trustee companies in Guernsey and Jersey require a license under the relevant laws to provide trustee services. They are regulated by the Guernsey and Jersey financial services commissions (the "GFSC" and "JFSC") respectively on an ongoing basis. Their website will contain a page which reflects all licensed and regulated Trust companies. The first rule would be to check the relevant commission's website. The GFSC and JFSC can also be contacted to find out if there are any current investigations into a particular Trust company. This conduct would unfortunately not guarantee a happy, lasting and no issue relationship. It can only be tested over time but at least it would offer some comfort.

The size of the Trust company should not be a decisive factor and will not necessarily guarantee satisfactory levels of client service. Size is not important. Most important is that the Trust company is regulated because that will provide comfort. Smaller Trust companies tend to provide a more personal service. Some clients find more comfort in bigger Trust companies.

The second reason is the fees. The Trustee's management fees for an offshore structure are usually charged annually in advance. The annual management fees provide normally only for basic services like provision of registered office, corporate directors and company secretary. Anything else done by the trustees is charged on time spent and this is usually where clients can be in for a lot more fees that what they actually expected to pay. So don't be caught out or lured with attractive annual management fees as it could proof to be costly in the end.

Make sure that you obtain the Trustee's hourly rates upfront and keep record of what they do or required to do. Ask for regular accounts. You need to manage your trustees.

During my three years at Law firm Mourant Ozannes in Guernsey I have managed to build up a good working relationship with a couple of reputable regulated trust companies and accordingly all of my clients make use of their services. It also allows me to intermediate on their behalf with the trustees and discuss any unforeseen costs or other issues.

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