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TRUST FORMATION
The most widely used vehicle for asset protection is a Trust. A variety of assets can be held in a trust, including immovable assets, stocks and shares, investment products, real and intellectual property, bank deposits and life insurance policies. We can assist you to protect your wealth & assets and save estate duty.
The most widely used vehicle for asset protection is a Trust. A variety of assets can be held in a trust, including immovable assets, stocks and shares, investment products, real and intellectual property, bank deposits and life insurance policies. We can assist you to protect your wealth & assets and save estate duty.
Advantages of Trust
Trusts are a powerful planning tool. While each case is different and must be evaluated on its facts, some of the more common trust uses are described below. The examples below are provided simply for guidance and sound professional advice must be sought before anyone considers establishing a trust for whatever purpose.
(1) Asset protection
Trusts can be used very effectively to protect assets. In simple terms, this feature of a trust is based on the division of ownership described above. Generally, assets transferred to a trust no longer form part of the property owned by the Settlor. Should the Settlor subsequently experience financial problems the trust assets cannot be used to satisfy the creditors of the Settlor. Those assets would be sheltered from creditors. It is vital that trusts for this purpose are established when the Settlor is financially secure and does not anticipate future creditors. It is important to note that these trusts are ineffective in defeating creditors of the Settlor who are known or anticipated at the time the assets are transferred and have strict financial requirements of the Settlor.
(2) Tax Planning
Assets transferred into a trust structure are, in simple terms, no longer considered as belonging to the Settlor. In theory, the income and capital gains generated by those assets should be taxed according to the rules in the country of residence of the legal owners - the Trustees. As the Trustees are often resident in an offshore jurisdiction that imposes no tax, the income and capital gains should be tax-free offshore. However, the advice of a professional tax adviser in the Settlor's and Beneficiaries' home jurisdiction should be sought to ensure that anti-tax avoidance legislation in the country of residence or domicile of the Settlor does not operate to reduce or eliminate the effectiveness of a trust for tax planning purposes.
(3) Avoiding Probate
In most common law jurisdictions the estate of a deceased must go through a probate procedure often entailing much delay, expense and publicity in the distribution of the estate. By establishing a trust, probate can be avoided as ownership to the trust assets has been transferred during the life of the Settlor rather than on death.
(4)Confidentiality
Generally, offshore trusts, their establishment and the assets they own are a private matter between the Trustee, the Settlor and the Beneficiaries. There are no public records or reporting of details of offshore trusts and they are often the subject of strict confidentiality rule in the relevant jurisdiction.
(4)Confidentiality
Generally, offshore trusts, their establishment and the assets they own are a private matter between the Trustee, the Settlor and the Beneficiaries. There are no public records or reporting of details of offshore trusts and they are often the subject of strict confidentiality rule in the relevant jurisdiction.
(5) Avoiding forced heirship
In some jurisdictions there will often be questions of forced heirship to consider. This means the deceased will not be permitted to leave property to anyone he wishes on his death and the law will deem the deceased to have made certain mandated dispositions. This issue is of particular concern in continental European countries and other civil law jurisdictions as well as in countries of Islamic tradition. A trust can be used to overcome the issue of forced heirship but care is needed in selecting a jurisdiction for the trust that has an appropriate trust law.
(6) Estate planning
Many people do not wish their assets to pass outright to their heirs, whether chosen by them or as prescribed by law, and prefer to make what they feel are more suitable arrangements. These arrangements might involve providing a source of income for a widow for life, making provision for the education of children or providing a fund to protect members of the family in the event of sudden illness or other disasters. A trust is probably the most satisfactory and flexible way of making arrangements of this kind.
(7) Long term care
A trust provides a vehicle by which a person can provide for those who may be unable to manage their own affairs such as infant children, the aged, the disabled and persons suffering from certain illnesses.
(8) Preserving family assets
preserving family assets or increasing them is often a motive for setting up a trust. An individual may wish to ensure that wealth accumulated over a lifetime is not divided up among the heirs but retained as one fund to accumulate further, with provision for payments to members of the immediate family as the need arises while also preserving assets for later generations.
(9) Business succession
A person who has built a business during a lifetime will often be concerned to ensure that it continues after death. If the shares in the company are transferred to the Trustees prior to death a trust can be used to prevent the unnecessary liquidation of a family company. The terms of the trust will ensure that the individual's wishes are observed. These might include provision for payments to be made to members of the family from dividend income received by the Trustees but that the Trustees retain the shares and keep the company running save in special circumstances justifying sale of control or liquidation. This approach may be particularly advantageous where the family members have little business experience of their own or where they are unlikely to agree on the way to manage the business.
In some jurisdictions there will often be questions of forced heirship to consider. This means the deceased will not be permitted to leave property to anyone he wishes on his death and the law will deem the deceased to have made certain mandated dispositions. This issue is of particular concern in continental European countries and other civil law jurisdictions as well as in countries of Islamic tradition. A trust can be used to overcome the issue of forced heirship but care is needed in selecting a jurisdiction for the trust that has an appropriate trust law.
(6) Estate planning
Many people do not wish their assets to pass outright to their heirs, whether chosen by them or as prescribed by law, and prefer to make what they feel are more suitable arrangements. These arrangements might involve providing a source of income for a widow for life, making provision for the education of children or providing a fund to protect members of the family in the event of sudden illness or other disasters. A trust is probably the most satisfactory and flexible way of making arrangements of this kind.
(7) Long term care
A trust provides a vehicle by which a person can provide for those who may be unable to manage their own affairs such as infant children, the aged, the disabled and persons suffering from certain illnesses.
(8) Preserving family assets
preserving family assets or increasing them is often a motive for setting up a trust. An individual may wish to ensure that wealth accumulated over a lifetime is not divided up among the heirs but retained as one fund to accumulate further, with provision for payments to members of the immediate family as the need arises while also preserving assets for later generations.
(9) Business succession
A person who has built a business during a lifetime will often be concerned to ensure that it continues after death. If the shares in the company are transferred to the Trustees prior to death a trust can be used to prevent the unnecessary liquidation of a family company. The terms of the trust will ensure that the individual's wishes are observed. These might include provision for payments to be made to members of the family from dividend income received by the Trustees but that the Trustees retain the shares and keep the company running save in special circumstances justifying sale of control or liquidation. This approach may be particularly advantageous where the family members have little business experience of their own or where they are unlikely to agree on the way to manage the business.
