Originating from the time of the Crusades when knights needed a means to protect their assets whilst away, trusts form an integral part of the fabric of British society, being used to hold assets for the benefit of families across generations allowing wealth to be managed by skilled professionals separate from the individuals who are destined to benefit from them.
Individuals from all sections of society are beneficiaries of trusts. Whether receiving help from a charitable trust to pay the rent, electricity bill or other necessity, taking the proceeds of a life assurance policy written under trust, those who have pensions or the wealthiest in the land taking a distribution to fund the purchase of a lavish asset, the chances are that we have all come into contact with a trust at some time.
At a time when the Duke and Duchess of Sussex are negotiating their financial arrangements after giving up their role as senior Royals, commentators are speculating on how the Duke’s father will deliver the promised financial support.
Whether the provision of a house to use in the UK or money to spend, certain commentators have suggested that this financial support will be provided by way of trusts that they can benefit from.
For centuries, trusts have held assets entirely confidentially out of the gaze of an interested public. Of course, any financial institution dealing with these trusts will hold extensive information relating to them and will report any concerns to the relevant authorities to ensure that they are not used for any criminal intent, but today the public has no right to know. Every person has a fundamental human right to privacy so the current situation is both natural and indeed in conformity with human rights laws. So, should the Duke and Duchess of Sussex be concerned about their privacy? Possibly.
The EU has decided that individuals connected to trusts should have their privacy significantly curtailed. In adopting the 5th Anti Money Laundering Directive, the EU has decided that all express trusts will have to be recorded in a central register that is accessible in a number of groups.
So, who can see the details of these trusts:
LGL Trustees Limited is regulated by the Jersey Financial Services Commission for the provision of Trust Company Business and Fund Services Business in Jersey. LGL Corporate Luxembourg SA is regulated by the Luxembourg Ordre Des Experts-Comptables
As you might expect, banks, other financial institutions and financial advisers are all Obliged entities, but there are other groups that might not expected to be included at first sight. How about your local bookmaker, casino or estate agent? In fact they are all Obliged entities with access to the register and will have access to the full range of information.
So far “legitimate interest” has not been defined and the hope is that the UK Government will set a high bar before making the information on the register available. The Society of Trust and Estate Practitioners have expressed the view that this should be so “to protect families’ basic rights to confidentiality in their financial affairs and to ensure that sensitive information is not vulnerable to abuse”. How this is defined will be crucial.
Who is in the group that can obtain information in this category?
The short answer is “everyone”!
Anyone at all can access information contained on the register where the trust owns a controlling interest in a non EU company.
There is an important message here for the Sussexes. If it turns out to be true that they intend to make their new life in Canada and earn their own money it is not inconceivable that they choose to establish one or more Canadian companies to conduct their business. As mentioned before, it has been suggested that the Sussexes may be supported by funding from trusts, and if the trusts own the company or companies then the condition will have been met and anyone at all will have the right to access the information held on the register for the trust that controls that company.
I am sure that it will not have escaped your notice that this is EU legislation. The EU requires the Directive to be implemented by 10th March 2020, and after many twists and turns we now know that the UK will leave the EU on 31st January 2020, so surely none of this will matter? Unfortunately, the UK has decided to adopt these measures even after Brexit, so it would seem that Brexit won’t save us from this brave new world.
Whist this piece has been written somewhat tongue in cheek about the Sussexes, there are significant messages here for all trustees that are required to register with the UK trust register. Many settlors, protectors and beneficiaries may be somewhat surprised that their personal financial information will become so readily available to the public after 10th March 2020. This is a conversation that could be challenging.