Trusts can be perfect vehicle for asset protection
THE word puerile has at its root the Latin for boy. I was always of the opinion that Rolf Harris's take on entertainment was embarrassingly puerile.
It appears also that his take on what constitutes sexual gratification was equally puerile.
It's not through voyeurism or a thirst for justice that I have an interest in Harris's demise. It's his reputed 23 million pound fortune.
It has been speculated that several of his victims are lining up to sue him for damages.
My interest has been peaked by the news that the majority of this fortune is not actually his, but is held by various trustees to the benefit of the beneficiaries of various discretionary (family) trusts.
One report I read had Harris in a huddle with his solicitors engaged in the changing of trustees of those trusts, presumably in preparation for his being disqualified to hold such a position if he were to go down - which he did, of course.
The point is that if the claim that most of the assets are held in trusts, then these victims and their no-win-no-fee lawyers will be sent packing empty-handed.
There's a lesson for all business people in the history of trusts, which are an animal peculiar to jurisdictions which have their roots in the British legal system.
In 1538, Henry VIII, king of England, was ex-communicated by the Church of Rome, later called the Roman Catholic Church.
His answer was to start up the Church of England, anointing himself as head honcho.
This gave Henry the opportunity to institute a serious land grab.
Landowning nobles were given a stark choice: convert from Catholicism to the Church of England or lose your lands to the State.
To many, the choice boiled down to either burning in eternal hell or losing land.
The smarties came up with the perfect solution. They transferred their landholdings into trusts.
As a trust has no religion, Henry couldn't enforce his law, convert or else.
Aside from that, the notion that a trustee in his/its absolute discretion could not be forced to provide for any particular beneficiary or class of beneficiaries at the insistence of the State, or an unsecured creditor, for that matter gave these landholders the perfect vehicle for asset protection.
That's as it is today. So if the reports circulated during the trial about Harris's financial arrangements are true, it's odds on that his wife and only daughter will not be herded into penury by litigious victims and their lawyers.
This assumes that the new trustees decide to exercise their absolute discretion in considering the benefits available to Alwen and Bindi under the relevant trust deeds.
There endeth the lesson.
Bob Lamont is director of Corporate Accountants situated at the Night Owl centre. He can be contacted at firstname.lastname@example.org.