A trust is an entity that is formed to hold, manage, and apply assets to the benefit of specific entities or persons, or towards achieving a certain objective. There are many benefits that can be gained from a trust, depending on the circumstances. Some of these benefits may include the following:
1.The Protection of Assets:
A trust can provide a protective element for assets, whereby assets are protected from your creditors or the creditors of your family members.
2.Flexibility:
A well written trust deed can provide much flexibility in terms of using a trust for effective estate planning. For example, if you use your last will and testament to nominate specific persons or entities to receive one or some of your assets, with specific intentions in mind, their circumstances may be very different when it comes time to distribute the estate. People could have passed away by then or be in a position where they are not of sound mind to manage the assets you intended for them. Companies/charities may not be in existence anymore. A trust can provide flexibility in the sense that the trustees can ultimately use their discretion to make timely decisions which are truly to the benefit of the beneficiaries.
3.Providing for Minor Children/ Mentally Incapacitated Persons:
A trust can be used to provide for minor children or grandchildren, or to hold assets in a safe and protected environment until they are of age to hold the assets in their own name. A trust can also be useful to hold assets to provide for persons with mental disabilities or other problems such as addictions.
4.Tax Implications:
In specific circumstances, a trust can provide tax efficiencies such as the income being split between multiple beneficiaries which could result in an overall reduced tax liability caused by the lower tax rates of individuals.
Placing assets in a trust can mean that the growth in the value of those assets will no longer occur in your personal estate, but rather within the trust itself, and this could prove advantageous when considering a capital gains tax and estate duty trigger event such as death.
If assets are placed in a trust, those assets will not be subject to estate duty on your death.
A trust should never be contemplated for any tax benefits incidental thereto.
5.Continuity
A trust can allow for continuity of the wealth that you have built up, for generations to come. Trust capital is not affected by death and can continue to be held for an unlimited amount of time. Therefore, it can be used to effectively pass down wealth from generation to generation.
6.Easier Access for Beneficiaries, Compared to a Deceased Estate
When you die, it may take anywhere from 6 months to years to complete the administration of your estate. During that time, your family will not have access to the assets held in your estate. If assets are held in a trust for their benefit, the trustees can provide for your family using the assets held in the trust, throughout the administration period of your estate.
7.One Asset- Multiple Beneficiaries
A trust can be useful in circumstances where there is a singular asset, which you would like to benefit multiple beneficiaries at the same time after your death. For example, if you have an investment portfolio, which you would like to leave to all of your children in equal shares, and your wish is that they do not sell the investments but rather benefit from the income and capital growth- leaving it to them in a will might be tricky especially if the investments cannot be held jointly- this is where a trust can come in handy, as the trust can hold the portfolio and use the income and capital growth to benefit all your children equally going forward.
Overall, given the proper circumstances, a trust can provide significant benefits for you, your family, and generations to come. Speak to a consultant at Fidelis Vox to provide you with advice regarding trusts or the advantages of setting up a trust, and if it is best advice for you.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)