Why is wealth planning relevant for trusts?

After nearly three decades of working closely with trustees, when I joined Nedbank Private Wealth I quickly recognised how the multi-award-winning wealth planning service, which was already invaluable to private clients, could be adapted to support trustees just as effectively.

At its heart, both wealth planning and trust planning aim to achieve successful financial outcomes over the long term, often decades or longer. It’s remarkable how just a 1% difference in annual returns can add up over time, potentially leading to thousands, tens of thousands, or even millions more in value. 

Is wealth planning a new concept for trustees?

Wealth planning has been a key part of how we support our private clients for over seven years now and it’s proven to be incredibly worthwhile. We often see that our clients have a collection of financial services and products amassed over their lifetime, but they don’t always have a clear strategy on how best to structure them for their future. We affectionately refer to this as ‘a collection of yesterday’s best ideas’.

What’s new is the ability to apply detailed cashflow forecasting, factoring in inflation, capital market expectations, and investment strategy returns, directly to the trust’s objectives in a clear and visual way. While trustees may already plan for some of these elements, the feedback we consistently receive is that our software and reports make the process far more intuitive and accessible. 

Trustees and wealth planning

By looking ahead with financial forecasting and long-term planning, trustees can better understand how the trust’s investments are likely to perform, and therefore the options available to them going forward.

What are the options?

All of the background information is entered into the cashflow modelling system (including the available investment assets, and any regular and one-off distributions), then at the touch of a button we can calculate:

• How much needs to be settled at the outset to meet the objectives of the trust.
• How much more needs to be settled if the original sum is not enough.
• Given the amount settled or currently available, how much can be distributed to satisfy all of the beneficiaries.
• If all of the beneficiaries are satisfied, how much could potentially be available for other recipients, such as through philanthropic activities.
• The rate of investment return required to meet the objectives.
• The additional amounts that potentially could be available if the investment strategy is switched.

Who benefits?

One of the reasons the wealth planning for trustees concept is so powerful is that it adds value to all the parties involved in the structure, including:

1. Individual trustees – who are empowered with valuable information and statistics to help appraise and make decisions about investment strategy and distributions.
2. Corporate trustees – where the wealth plan provides a robust audit trail to record why decisions were made and actions taken.
3. Settlors – who can understand and calculate how much is needed to set up a trust to meet long term financial goals.
4. The beneficiaries – to whom you can justify and explain why distributions can or cannot be made.

How has this worked in practice?

We’ve seen a range of real-world scenarios where wealth planning has helped trustees make more informed decisions, for example:

• Insufficient initial settlement – In one case, the original sum settled into the trust was not enough to meet the planned distributions under the existing investment strategy. By using our forecasting tools, the trustees were able to identify the shortfall and take action, settling additional funds and adjusting the investment approach to better align with the trust’s objectives.
• Rising care costs – Trustees were concerned about the increasing cost of care for a beneficiary with deteriorating health. Wealth planning helped them to model future expenses and assess the sustainability of distributions, helping them plan more confidently for the beneficiary’s long-term needs.
• Education funding challenges – The introduction of VAT on private school fees raised questions about whether one trust could continue to support all its beneficiaries. Our analysis helped the trustees understand the financial impact and explore alternative strategies to continue funding their education.
• Managing spendthrift behaviour – In another instance, a beneficiary was requesting significant ongoing distributions. The wealth plan clearly demonstrated why the trustees could not meet these demands without compromising the trust’s long-term viability, providing a transparent and defensible rationale for their decision. 

Maintaining confidence over time

Making sure a trust doesn’t run out of money is clearly important. A good wealth plan helps by looking at the trust’s existing position and mapping out what’s expected to go in and come out over time. With a clear plan in place, trustees can show exactly why certain choices were made. If questions are raised later, they can point to the plan and explain how they considered the market, the needs of beneficiaries, and the long-term goals of the trust.

People often ask us what happens when things change. It’s definitely not a case of creating a plan and then checking back in 25 years to see how it went. Wealth planning is part of our ongoing service, and we review and update the plan regularly. If something significant happens, such as a change in circumstances or a trigger event, we can easily adjust the plan and rerun the forecasts to reflect the new situation.

So, why should trustees be using wealth planning?

Wealth planning is a thoughtful way to help trustees, settlors, and beneficiaries feel more secure about the future. It brings clarity to complex decisions, helping everyone to understand what’s possible, and supports the trust in staying on course over time. Whether it’s used to guide spending, plan ahead, or simply offer peace of mind, it’s a valuable tool for anyone involved in managing or benefiting from a trust.

For more information, please get in touch.

The value of investments can go down as well as up, and you may get back less than you originally invested.