Trust me…I’m an accountant

By Malcolm McGready, Ensors Chartered Accountants

There is an irony in the fact that, when discussing the options available for wealth planning with clients, a significant proportion have a mistrust of trusts.

Published in Suffolk Director Magazine, Winter 2021|22

Accountancy: Ensors Chartered Accountants

Somehow the word ‘trust’ when referred to in a financial perspective has become synonymous with ‘tax avoidance’ and an offshore trust has even more of a stigma attached.

If the media wish to cast doubt on the financial probity of a high-profile individual, they might include in the report that they have put assets into a trust fund or even an offshore trust fund. The subsequent statement that ‘there is no evidence that he has done anything wrong’ is glossed over by the listener, the implication is clear.

Getting the balance right when it comes to trust

The problem is that there is no balance. Whilst ‘trusts can be used for illegal and nefarious purposes’, so too can companies, sole traders and partnerships. Many things can be manipulated and used for illicit purposes, but this doesn’t automatically mean that they are to be avoided.

Most people have trusts of one sort or another. For example, a pension scheme is a trust, and life insurance is written in trust. There are also a great many charitable trusts.

Simply put, trusts are a device or tool to achieve a purpose, and in certain situations, they are the best way to achieve that purpose.

Consider the following example:

Mr Green would like to pass some of his wealth on to his grandchildren. However, the current grandchildren are all minors and there may yet be more grandchildren to come. Additionally, Mr Green is concerned that passing funds, that his grandchildren can access at age 18, is risky. If a significant amount of money will be available at 18, is that really in the best interests of the grandchild?

To minimise his concerns, Mr Green can create a trust that will allow all of his grandchildren to benefit. He can stipulate the age that each grandchild benefits and he can carefully consider his decisions. He can also direct the funds between the grandchildren according to their needs.

In this example, there possibly could have been some tax advantages, but not necessarily. Also, minimising his tax bill was not the purpose behind his creating of the trust. In fact, it is likely that a better financial result would have been achieved by gifting the funds outright to the current grandchildren, and keeping fingers crossed that at age 18, the grandchild deals sensibly with the funds. This might be better financially but may not be the ‘responsible grandparent’ answer.

The main message here is not to be swayed by the negative publicity given to trusts. They can be a useful tool in achieving a desired outcome. The key points for most clients are to firstly identify what it is you wish to achieve and then consider whether a trust can assist.

Do not be led by the tax position and finally, keep it simple.

Malcolm McGready is a Partner at Ensors Chartered Accountants.
E: T: 01473 220022 or visit

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