Trust Formation

Trusts are a way of holding and managing assets. They are extremely flexible, and tried and tested over the centuries.

You can use a trust to protect, enhance and pass on assets for current and future generations. And with careful planning and expert advice, a trust can perform a range of valuable functions, including:

• Preserving wealth

A trust ensures accumulated wealth is centralized and controlled by a dispassionate custodian, who is responsible for holding the assets together, and for preserving and enhancing them. This prevents family wealth being divided up among heirs – instead, it’s retained as one single fund that can continue to grow for the benefit of future generations. This can be very important for a family business, as the shares can be transferred to a trust before the death of the owner, avoiding the need to liquidate the company.

• Creating a legacy

You can use a trust to pass on your legacy to future generations – so your name and achievements can continue, benefiting others.

• Protecting assets

Trusts are often used to protect and ‘ring-fence’ assets. This is highly valuable if an individual or family’s wealth is threatened – for example, by a business disaster, unexpected litigant or unforeseen divorce claim.

• Estate planning

Trusts, like wills, can be an effective way to plan how someone’s assets are managed or distributed after death. They can be used to avoid ‘forced heirship’ issues, and to help pay for children’s education.

• Tax planning

When you legally transfer your assets to a trustee, they are no longer considered to be part of your estate. So, with appropriate planning and advice, the use of a trust may reduce your tax liabilities.

• Philanthropy

Trusts can be set up for charitable purposes, and their structure depends on the jurisdiction where they’re established. You can appoint specific charities, or choose a more general class of charitable beneficiaries, such as ‘wildlife’. In the latter case, trustees use their discretion to divide income and capital between several different charities.

Other uses for a Trust include:

• To hold for property for minors or successive generations of a family
• To protect property against spendthrift people
• To provide secretly for others
• To provide for a couple on their marriage whilst ensuring that the property so provided is ‘tied up’ in the event of that marriage failing
• To establish a fund for the benefit of family members according to future needs as and when they arise
• As an investment vehicle (typically via unit trusts)
• To provide pensions for employees and dependants
• To provide an incentive to the workforce: e.g. via employee trusts of various kinds
• To make provision for abstract purposes which are not charitable (‘the purpose trust’)
• To enable charitable objects to be carried out
• As part of commercial arrangements: e.g. to protect commercial lenders
• We advise clients about the creation of a CIT, including proposing structure ideas for creating, managing and dissolving a CIT and draft all required legal documents.