Family Trusts

Why establish a Trust?

Throughout their history, trusts have provided people with a means of protecting their assets and controlling how they are used after they have been given away. They are particularly useful for protecting assets for vulnerable or financially naïve beneficiaries and can ensure that your hard-earned wealth is passed down through your own Bloodline, out of the clutches of ex in-laws and creditors.

Control

When a settlor puts assets into a trust, they set out in the trust document how those assets are to be dealt with. They will be able to say who will benefit and to what extent; whether the property may be sold or used for certain purposes and who will benefit from them in the future. The day-to-day management of the trust property is the responsibility of the trustees, but the settlor (if they are alive) may also be a trustee. They can therefore, both remotely by the terms included, and directly as trustee, manage property that they no longer own - provided that their decisions are in the interests of the beneficiaries and in accordance with the terms of the trust.

Protection

Perhaps you would like to give away some of your wealth to benefit other members of the family, but you are concerned that it will be dissipated. A trust can restrict the amount and type of benefit received from the property. For example, you may wish to assist your niece with her university expenses, but you do not want her to spend the money on a fast car. A trust is the ideal vehicle to achieve those ends.

Flexibility

A trust allows your trustees to adapt to circumstances as they arise. If you make an outright gift of property, you cannot change your mind and give it to someone else. Suppose you have two adult children: one is in highly paid employment and the other is struggling to meet professional training costs. With a trust, you can direct the income from, say, a rental property, to the child with the low income. In later years, the highly paid child takes a career break to raise a family, where as the other is earning a good professional salary. The trust income can be switched to help with the costs of raising the grandchildren. If you had given the rental property away, you would not be able to redirect the income. If you had kept it, the income would be taxed at your personal rates.

Trust Types

Interest-in-Possession Trusts

This is where the income or benefit must be given to a specific beneficiary - it is his or hers by right. There may be more than one beneficiary but they will all have a fixed entitlement.

Discretionary Type Trusts

Benefits are allocated at the trustees’ discretion to any one or more of several beneficiaries. The trustees might even decide, for a time, to benefit no one; the income being accumulated for future use.