According to Financial Times News, a partner at law firm Maurice Turnor Gardner reveals how trusts can create more problems than they solve despite their centuries-old utility. The article highlights several critical trust failures, including a Russian oligarch case where Sergei Pugachev lost $1 billion in assets because the court found he retained too much control. Another case involved unequal inheritance distribution that created lasting family schisms among grandchildren. The lawyer emphasizes that trusts require careful planning, clear purpose definition, and proper transfer of control to trustees to avoid legal challenges and family conflicts.
The Family Fallout Factor
Here’s the thing that really struck me – we often think of trusts as these sterile legal instruments, but they’re deeply emotional family documents. The lawyer shares this heartbreaking story about having to tell a family after the client’s death that the business shares were divided unequally between siblings. The grandchildren still see it as unfair decades later. That’s the kind of damage that money can’t fix.
And it’s not just about who gets what. The article points out that simple wording like “children” can include stepchildren or non-biological children you’ve raised. That might not be what you intended at all. Basically, you’re creating a legal framework that will outlive you, so every word matters.
The Control Illusion
This is where things get really tricky. People want to set up trusts but still pull the strings. The Pugachev case is a perfect example – he thought he was protecting $1 billion through five discretionary trusts, but because the trust deeds gave him so much power, the court said the assets were still his. Poof – creditor protection gone.
The lawyer mentions struggling with a current client who’s making the same mistake. He wants to retain control over asset distribution and management, which could provoke siblings to challenge the entire structure. So what’s the point of setting up a trust if you’re just creating litigation bait?
The Trustee Selection Problem
Choosing trustees is apparently “extraordinarily difficult” according to the expert. Individual or corporate? Onshore or offshore? If you pick an individual, what happens when they retire or die? Corporate trustees seem safer, but then you need to worry about who owns the company and their business plans.
It’s one of those areas where professional advice really pays off. Most advisers have worked with various trustees and can help evaluate candidates. But here’s a question – how many people actually take this step seriously versus just picking their brother-in-law?
Execution Matters More Than Intent
The final piece of advice sounds obvious but is apparently often ignored: set up the trust correctly. Courts are “littered with cases” where trust establishment was challenged. The formalities matter – if you don’t properly transfer control from yourself to the trustees, the whole structure collapses.
Look, trusts can be brilliant tools for succession planning and asset protection. But they’re not magic boxes you can stuff assets into while keeping one hand in the cookie jar. They require clarity of purpose, family communication, and proper legal execution. Otherwise, you might be creating the very problems you’re trying to avoid.
