Where did it all go wrong?
All families are different – some get on like best friends, some are chalk and cheese and others do not speak to their families at all. As they say, you cannot choose your family.
Last week a new book was released by Manny and Brigitta Davidson. In this book, they tell their very personal story all about how they have lost over £600 million of assets and been removed from their family home…by their own children.
Mr Davidson and his father built up an extremely successful business buying and refurbishing properties. Over the years Manny and Brigitta’s wealth grew. They lived in Lyegrove House, a beautifully elegant Jacobean mansion next door to Prince Charles Highgrove estate, they had collections of art and antiques, millions of pounds worth of jewellery, George III furniture to name but a few things.
Due to their extensive wealth, they decided to try and secure their children’s futures. They bought their children properties and also established trusts funds for them to benefit from… and benefit they did with a reported £20 million a year in income being received from the trusts funds.
However, all did not end happily. In 2011 the family fell out resulting in Manny and Brigitta’s children no longer speaking to them. Properties that Manny and Brigitta once lived in, they have been refused entry to. Paintings that once hung on their walls, they can no longer see. All attempts at reconciliation have failed. Manny and Brigitta blame themselves for the family’s issues as they believe that it is their fault for ‘spoiling’ their children.
The family ended up in court arguing over who owned what assets. The children argued that what has been put into trust is theirs to have as and when they want.
The trusts established by the Davidson’s was discretionary trusts. This means that the Trustees have a huge amount of discretion in who gets the trust assets and when. Once the Davidson’s have given the assets to the trusts they no longer have any control over them, they cannot force the assets to be used in a particular way or go to a specific person. If the Davidsons were not Trustees, then they would have no involvement in the trusts going forward.
The result of this is that the £600 million fortune held in trusts is outside of their hands. The properties that they transferred into trusts are no longer theirs. They have no rights to visit the properties they owned, or use the assets they had. Once they have given them away that’s it.
Whilst many people don’t have this kind of wealth, the circumstances are not that uncommon. It is all too easy to believe that you can completely trust your families and will agree as to how things should be handled going forward. That is not always the case.
So, what are discretionary trusts?
Discretionary trusts is one which gives the greatest flexibility possible to the people running it. Discretionary trusts names a number of people as potential beneficiaries but no one person has any definite rights or entitlements.
An example of this would be to say: “I give my Trustees the sum of Twenty Thousand pounds to distribute between such of my grandchildren as my Trustees shall in their absolute discretion think fit”.
If there were 3 grandchildren, A, B and C then the trustees can do whatever they want - A could have all £30,000 with B and C receiving nothing.
Some people like these trusts as they enable the trustees to take into account an individual's circumstances at the time of distribution and see who actually needs what. As the Trustees have complete authority nobody can demand their share of the trusts. It is common for a letter of wishes to be left with this type of trusts to give guidance to the trustees as to what factors they should take into consideration – for example, who is earning good money, has behaved well, who has greater financial needs etc. However, this letter of wishes is only a wish and not legally binding.
Discretionary Trusts can be set up during a lifetime or in a Will depending on your specific circumstances and what you aim to achieve. However, there are very complex rules surrounding trusts and there can be tax implications so it is essential to ensure professional advice is taken.
Discretionary Trusts can be a great way of safeguarding assets for future generations. However, Discretionary Trusts can be extremely complex and if written incorrectly can defeat the purpose completely and cause problems.
If you would like more information about discretionary trusts or would like to arrange an appointment to discuss the different trust options that are available please do not hesitate to contact Lauren Smith on 0114 339 0096 or email email@example.com