Irrevocability

It is not correct that trusts cannot be revoked. Trusts can be made revocable, but this usually has tax, estate duty, asset protection and stamp duty disadvantages. Revocability should be discussed when the terms of the trust are considered.

Loss of Control of Property

There are many people who like the idea of a trust but want to continue to exercise effective control over the trust assets, despite the transfer to the Trustees. If too much control is retained, however, the person who set up the trust may be regarded by law as the owner. This may make the trust invalid. The following are devices that may reassure the Settlor about the concept of a trust and the transfer of assets:

• Memorandum of Wishes
  It is common for the wishes of the Settlor to be noted in a written memorandum. This outlines how the assets would have been managed had the Settlor retained ownership. The wishes of the Settlor are not binding, but in practice most reputable Trustees would follow them unless a change of circumstances makes it disadvantageous to the beneficiaries to act in that way.
• Protector
  When setting up a trust it is possible to appoint a protector who has some degree of control over the trust property. We recommend limiting the protector’s powers to vetoing the decisions or actions of the Trustees, rather than having power to force the Trustees to act in a particular way as it is important to avoid the protector being considered a quasi-Trustee and possibly causing tax disadvantages.
  
  It is usual for a trusted friend, relative or professional adviser of the Settlor to be appointed protector. It is also becoming increasingly common to use the services of a professional trust company. Sovereign can act as a professional protector when not retained to act as Trustees.
• Two Tier Company and Trust Structure
  Greater flexibility can sometimes be achieved by having the underlying assets owned by a company whose shares are owned by a trust. The Settlor may act as the director of the company and therefore exercise day-to-day control over the underlying assets with minimal need to refer to the Trustees.
  
  This two-tier structure may have tax and other disadvantages where the director of the company is resident in a high tax country but can be used to good effect in certain situations.
• Joint Trustees
  A trust could be structured so that there are joint Trustees, with the agreement of both needed in order to take any action. The second trustee could be the Settlor or a corporation controlled by the Settlor. There may be negative tax or other consequences resulting from such a structure if the Settlor is resident in a high tax jurisdiction but this may be a solution worth considering.
  

Costs

Many people believe that the costs of running a trust are prohibitive. But the level of fees charged by independent trust companies generally makes the advantages of setting up a trust available to those with even relatively modest estates. Non-institutional trust companies offer a more personalised service and also benefit from the fact that they are truly independent.