Establishing a Trust
A trust is a legal agreement which involves: a trustor, a trustee (an individual or company) who conducts business for the benefit of other people (the beneficiaries.) For instance, a trustee may carry on a business for the benefit of a particular family and distribute yearly profits to them.
What’s the key benefit?
A trust can help protect your estate or your beneficiaries’ estates. The establishment of trusts can be structured so that after your death, your beneficiary will receive part of their inheritance yearly, for as long as you see fit.
For example, you could provide your daughter with a small annual sum until she reaches the age of twenty-five, at which stage she receives a lump sum payout. Alternatively, you could stipulate that she receive an annual amount and that she be given the lump sum only when she graduates from university, or gets married or some other circumstance that you specify.
So you see, a Trust ensures the management of your estate is handled the way you want, and in a tax efficient manner, after your death.
What other advantages are there?
There are many types of assets that can be held in Trust. These may include investments, land or property, cash or other valuable assets like jewellery, furniture, or paintings. The money and investments held in trust are also called “Trust Capital”. This capital may produce income, such as interest or dividends on shares.
Another advantage of a trust is that you can specifically plan the distribution of income, capital gains and assets to your beneficiaries.
Other benefits of a trust are that probate can be avoided, meaning substantial savings in legal fees, time and paperwork can be made. A trust also gives greater protection than a will against any legal action taken by a dissatisfied family member or friend who wants to dispute the distribution of assets.
Lastly, Trusts offer more control than a will in complex family situations such as leaving assets to a married beneficiary. A trust can be customized so the spouse is only able to access the asset with the agreement of the beneficiary.
Who should be a Trustee?
The trustee is someone you choose to take care of your trust; they can be a family member or a friend, as long as they’re over the age of eighteen.
Think carefully before nominating though, your trustee will be responsible for ensuring the trust earns the maximum amount of interest and is distributed to the beneficiaries properly.
To ensure you don’t upset any friends or family, you can also use a corporate trustee company to handle your affairs, especially if the estate is large and there are investments that would take more time to manage than a friend or family member could be expected to give.
It’s clear that setting up a Trust correctly is vital. The expert team at Alliance Accounting provide a high level of care and attention – because they specialize in setting up Trusts. To find out if a Trust will benefit your situation, contact an Alliance professional today.