Disclaimer: Consult legal, financial, and tax professionals before forming a trust and transferring property into it.
Various types of trusts exist, serving different purposes such as managing assets for legal heirs, providing for family members, ensuring smooth business transitions, and protecting assets from litigation.
A. Mechanism:
A trust acts as an independent entity where assets are managed for the benefit of beneficiaries by appointed trustees, governed by a trust deed.
The assets of one party are handled by another for the benefit of a set of persons.
B. Purposes for making a trust:
– Smooth transmission of assets to legal heirs
– Care for family members in need
– Prevention of family disputes
– Seamless business succession
– Protection of assets from claims and litigation
– Charitable purposes
– Addressing specific needs
C. Types of trusts:
– Public or private based on beneficiaries
– Testamentary or non-testamentary based on authority
– Specific or discretionary based on beneficiary shares
D. Benefits:
– Defined organizational structure in trust deed
– Protection of assets and interests of beneficiaries
– Potential tax benefits
– Avoidance of estate tax/duty
– Care for beneficiaries unable to manage assets
– Protection from inheritance claims
– Addressing specific needs
E. Possible challenges:
– Costs of registration, accounting, and legal advice
– Finding suitable trustees
– Stamp duty and registration costs
– Compliance with trust deed terms
– Dissolution costs
– Organizational and advisory challenges
– Cross-country complexities
What should you do?
If you have specific asset management needs, setting up a trust may be beneficial. Seek advice on costs, requirements, and tax implications before proceeding. Keep asset management simple yet effective by choosing the right trust structure.
