Disclaimer: Consult legal, financial, and tax professionals before forming a trust and transferring property into it.
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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.
