Characteristics and Benefits of a Trust

A trust is the most popular and successful method of sheltering and protecting assets and assuring succession to chosen beneficiaries.

Establishing a Trust

A trust is created by way of an agreement whereby a person (the Settlor) transfers property to another person (the Trustee) who, in accordance with instructions in a Trust Deed, is obligated to hold trust property for the benefit of one or more persons (the Beneficiaries). It is possible to have a further person (the Protector) to oversee the actions of the Trustee. A professional trust management company in a suitable jurisdiction can also be appointed as the Trustee.

Trust Assets

The assets of the trust do not form part of the Settlor's estate, and as a result, on the death of the Settlor long, complicated and costly probate and winding up procedures are avoided; nor do the trust assets form part of the Trustee's own estate, so with the exception of entitlement to fees, the Trustee may not acquire any benefit from the assets. A trust may be terminated after a certain period of time or once the trust assets have been distributed to the Beneficiaries.

Letter of Wishes

In many instances the trust is discretionary and it is common for the Settlor to provide the Trustee with a letter of wishes nominating his Beneficiaries. The Trustee will always follow the letter of wishes if it is in the best interests of the Beneficiaries. During his or her lifetime, the Settlor may amend the letter of wishes at any time.

Confidentiality

The Settlor and ultimate Beneficiaries benefit from a high level of confidentiality.

Taxation Benefits

A trust may eliminate, reduce or postpone taxation of assets placed in the trust or income derived there from or capital gains tax on the sale of assets depending on the client's particular circumstances. Prior to immigration to certain countries, a trust can protect assets from falling into an unfavourable tax environment. Trusts can be useful in protecting the Settlor and Beneficiaries from unfavourable exchange control laws and may also provide protection from creditors, forced heirships and unfavourable personal and business relationships.