Hold financial investments in trusts


When we hear the word “investments” our immediate thoughts go to stocks and actions that can produce gains or losses. We tend to stop at this basic level of understanding without delving deeper, so as not to get lost in the increased complexities surrounding the subject of financial investing. These complexities – along with the possibility of losing money – can be intimidating.

The truth is that an investment is simply a way of trying to make sure that your savings don’t lose value over time, while trying to make a gain or generate some form of income over the years. . However, achieving these goals is not a simple task and expert help is often not only recommended but essential.

Investments generally consist of savings. When investing your savings, the goal is to preserve, as much as possible, your financial future and that of your heirs, during your lifetime and beyond, or to create a safety net when your income is insufficient. to meet their needs and conditions.

It is by figuring out how to achieve these goals that the way these investments are held can make a difference. Holding an investment in trust ensures that such savings are professionally owned and managed according to one’s needs, even when one cannot do it on one’s own, such as due to old age or illness. sudden. The trustees would ensure that the investment is managed in accordance with the wishes stated by the settlor and that distributions are made in accordance with the settlor’s requirements. Such an arrangement would provide the necessary assistance and care at the most vulnerable time of their lives.

The longevity of the trust, which can be up to 125 years, allows the investment to continue over several generations. Such a characteristic makes it possible to create a family “piggy bank” which is passed on over the generations, while maintaining a level of growth in line with economic conditions. Investments held through trusts also prevent unnecessary dissipation of accumulated savings, as these continue to be managed by a professional trustee.

Once the investment is held in trust, it is the trustee who holds and owns the investment for the benefit of the beneficiaries in accordance with the terms of the trust instrument. These conditions can be adapted according to the wishes of each one.

The trust deed, which will be drawn up in accordance with its requirements, will also set out the process to be followed when the trustee exercises its investment powers. A settlor can choose an investment manager himself, with whom the trustee will then establish a relationship.

Alternatively, this can be left to the sole discretion of the Trustees who can then contact an investment manager of their choice. A professional trustee would probably have worked with most local providers and would be able to identify the most suitable provider on a case-by-case basis. Since a trust is established to meet the specific needs of the settlor, all investments made are in line with the settlor’s intentions and are designed to meet the settlor’s investment objectives as much as possible.

The expertise of the trustee lies in the management of trusts and not necessarily in the management of investments. If the trustee had discretion over how the investment powers are to be exercised, the trustees would bring in experts to manage these investments, usually in the form of discretionary portfolios.

In a discretionary portfolio, an investment manager is appointed to invest within the risk parameters defined by the client and the trustee. A third party investment manager would therefore generally be appointed to buy, sell or hold investments which are more likely to meet the objectives set by the client. The Trustees would then monitor the performance of the Investment Manager to ensure that the investment is proceeding within agreed parameters.

The professional trustee will usually hold a number of portfolios in a number of trusts with different investment managers, which will allow them to gain a good level of understanding of the products, understand the philosophy of each service provider and keep themselves aware of the current economic climate. . As an additional guarantee, the trustee could also engage additional expertise to ensure appropriate and effective monitoring of the investment managers concerned.

This article was published by Patrick Spiteri, Director at EWS Trustees. For more information, visit ewstrustees.com or send an email to [email protected]

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