6 planning opportunities provided by Trusts
As the political movement to establish global transparency on tax matters continues, the confidentiality and privacy of one’s financial affairs remains uncertain.
Whilst offering legitimate confidentiality and privacy, trusts have become, after centuries of use, the traditional vehicle for wealth structuring for many other reasons - reasons that encompass personal, business and philanthropic objectives.
As governments across the world focus on automatic exchange of information resulting in the erosion of an individual’s right to privacy, it is timely to remind ourselves of the many other planning opportunities provided by trusts:
1. Succession planning
The passing of wealth to the next generation can be a sensitive, complex and challenging exercise. The flexibility of a trust allows for the succession of family wealth or businesses in accordance with the unique objectives and values of the head of the family. The division, investment and distribution of assets can all be managed through an appropriately structured trust.
2. Avoidance of probate
Settling assets from the estate into trust before the settlor’s death will avoid the administrative cost and burden of probate. Assets subject to probate will be frozen until the process is completed, which may take months or even years. Probate is a matter of public record and can be extremely costly when assets are sited in different jurisdictions.
3. Wealth protection
Assets transferred into trust at the right time for legitimate reasons can be protected from existing and future creditors and those who may try to take them by force or legislation.
4. Pre-marital planning
Trusts are commonly established and funded prior to the marriage of a settlor, or his/her children, thereby protecting assets from spouses and their families.
5. Pre-migration planning
Assets and affairs can be structured in a fiscally efficient manner through the use of a trust before a settlor becomes resident in another country.
For those wanting more active involvement in achieving their philanthropic objectives, a trust structured for charitable purposes can provide the ideal administrative and funding vehicle
Through a carefully constructed trust, settlors can retain elements of control over trust assets; obtain certainty as to how and when beneficiaries receive assets; protect assets from uncertain political and socio-economic climates; avoid forced heirship rules; and structure businesses to ensure effective management and corporate succession.
So, whilst confidentiality may no longer be assured, if a trust is established with tried and tested laws and an experienced and robust trustee, all other reasons for structuring and managing wealth through a trust remain as relevant as ever.