TRUSTS - why have them?

Trusts have been around for a very long time. Individuals and families use them as a way to control how their assets are held and transfered to other people. Control is a primary reason why trusts are used. You will also hear the words "asset protection", which refers to protecting assets from risk. What are these risks? They can affect people whose property is being placed into the trust and also the future beneficiaries of the property. The risks can include:

• bankruptcy
• loss of heirlooms/"family money" through divorce or remarriage; 
• incapacity arising through a health event;
• being too young or inexperienced to deal with property or investments
• assets being accessed by those with addictions who would otherwise use those funds to further support their addiction;
• certain taxation outcomes

Taxation can often, but not always, be a secondary concern compared to family goal planning.  Family goal planning is primarily concerned with the protection and preventative measures listed in the other examples above.

For example, imagine a family has a child with special learning needs. The child is not disabled as such, but perhaps there is a concern that the child will never learn the value of money or will be unable to handle financial transactions. The wills of the parents can include a trust from which that child benefit. This means that no property needs to be transferred directly to that child, and payments can be made by the trustees as and when they are required, or even a house purchase, without the child needing to be involved in any of the paperwork or any of the transactions. There could also be flexibility so that certain funds could be paid to the child – for instance they may develop confidence and an ability to deal with certain amounts and in this way the trustees can support the development of the child whilst at the same time control the larger portion of the fund for the child's benefit.

There are many many scenarios uses of trusts which ensure that the beneficiaries interests are looked after.

As usual it is very important to obtain professional advice when looking at Estate and Asset Protection planning. (I am able to recommend suitabley qualified people).