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THE BRIEFING Wealth management


Spanning decades, generations and jurisdictions – as well as the pages of newspapers – this expensive legal row is surely the last thing that Edoarda Crociani wished for when she settled the trust for her then teenaged daughters in 1987. However, her case is not unique in every respect. The heady mix of intergenerational discord and changing family structures has seen more people beat their way to the courts. From 2012 to 2016 the number of trust disputes going to the High Court in London more than doubled from 98 to 201 cases – according to a freedom of information release in 2017. Nonetheless, the Crociani case stands out for the sums involved, the duration of dispute and the high-profi le nature of its combatants; the family’s social circle includes Prince Albert of Monaco. Moreover in the matter of trusts, cautions Natasha Stourton, a


partner in the trusts, estates and inheritance disputes team at Withers, it’s a ‘very clear example of the steps that can be taken which turn out to not necessarily help the family’. ‘A case like Crociani could have been avoided if there had perhaps been clearer advice or more strong-willed advice at the beginning, so that [Edoarda] really understood what she was doing,’ says Stourton. Anna Gaston, trusts expert and counsel at Maurice Turnor Gardner, notes the large personalities involved and the reported change in family dynamics. ‘On the face of it, it appears [Edoarda] wasn’t supposed to be a benefi ciary and she wasn’t supposed to take money out of the trust,’ says Gaston. ‘But her argument was that she had set this trust up with the intention that she would be able to benefi t through some indirect means.’ As a result, says Gaston, much of the legal argument has been about ‘working out what really was intended’ when the trust was set up back in the Eighties – what its remit was, who the benefi ciaries were, and who the trustees should therefore be thinking about when making decisions about what to do with the assets held in it. Perhaps unsurprisingly these sorts of issues are the ones that come up in a vast number of trust disputes. ‘Often a family will set up a trust one day, thinking it’ll work forever, and perhaps circumstances change,’ notes Gaston.


So how does one future-proof a trust? ‘The main advice when you


are setting up your trust with your lawyers, your team and your family, is to war-game it,’ says Gaston. In other words, look at every eventuality and be sure you can live without the money you want to settle into the trust, and that you have a back-up plan if something goes awry with your other sources of wealth. ‘Have your emergency strategy for as many diff erent scenarios as you can think of so that your trust can adjust to your life,’ cautions Gaston. Once a trust has been set up, you must abide by ‘the rules that were created’. Moreover, she advises that everyone involved in that process – the trustees, the settlor, the benefi ciaries – fully understand what they can expect from the trust to avoid the type of consequences that have arisen from the Crociani trust. Trustees will retain the ‘ultimate power’, notes Stourton. But there are some ways that settlors – that is, those that set money into trusts – can retain some control. ‘You can shape the trustees’ power,’ she adds. For instance, the levels of distributions that trustees can authorise may be capped at a certain level, above which they may require consent for an authorised ‘protector’, who could be the settlor themselves. Alternatively, if a settlor would like to set up a ‘plan B’ in case of changing fi nancial circumstances, they could also be named as a benefi ciary. ‘But ultimately the decision of whether to make [a] distribution has to be the trustee thinking what is the best


A family will set up a trust


one day, thinking it will work forever. And perhaps


circumstances change


decision in favour of all the benefi ciaries,’ adds Stourton. And just as the lives and needs of settlors and benefi ciaries change, so too should the management of trusts. ‘It’s an ongoing process,’ advises Stourton. ‘Even if the trust is air-tight at settlement,’ there may be a time in the future when it’s worth considering once more ‘whether the trust is still working in the right way’. In essence, things change and trusts need to be able to change with them. The Crociani case also shows it’s vital for trustees to keep a close


eye on high-value items held in trust. ‘Things do go missing,’ says Gaston, who notes that it is common for items such as artworks to be loaned by trustees to benefi ciaries. ‘Trustees are very conscious of the diffi culties of holding an asset like an artwork which can have huge value and not be under your control,’ she says. Perhaps, however, the overriding lesson from the Crociani saga, is the most glaringly obvious one of all. Trusts are not a ‘personal piggy- bank’, says James Quarmby, tax partner at Stephenson Harwood. ‘The courts in most respectable jurisdictions, like Jersey, will not take kindly to trust law being ignored, no matter how wealthy the settlor,’ he warns. ‘I have no idea who is right or wrong in this case, but it is a salutatory lesson that if you create a trust then, unless it is a revocable trust, you have to accept that you have lost control of the money settled, even if you later change your mind.’ S


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