A trust is a wonderful way to protect those you love.
Protect your family against business risks
Protect family property
Provide for your parents, children and grandchildren
Safely build an empire
What is a trust and how does it work?
A trust is a type of business structure used for asset protection and has tax advantages. Someone is appointed to run the trust, this person or entity is called a "Trustee". The Trustee is responsible for managing the assets and liabilities of the trust for the benefit of the beneficiaries of the trust.
Why set up a trust?
The key benefits of trusts are asset protection and tax advantages.
- Asset protection: The beneficiaries do not own the trust assets. This creates a layer of protection against creditors and litigation.
- Providing for your family: You can control how the money is managed and distributed. For example, you could set up a trust that only pays out for your kids' (or grandkids') school fees and medical expenses. It is also useful if the beneficiary is young or unable to manage their own finances.
- To provide for a loved one with a disability. This can be done through special disability trust.
Trusts have tax advantages such as:
- People on high marginal tax rates can distribute to other family members on lower incomes which creates tax advantages. Please note that trust income to under people under 18 years attracts a higher tax rate.
- Trusts are entitled to a 50% capital gains tax discount. Companies are not entitled to such a discount.
How to set up a trust?
Setting up a trust involves selecting a trustee, trust assets and beneficiaries, selecting what type of trust structure best suits your needs, preparation of trust deed, settlement, the trustee(s) meet and agree to the appointment, signing the trust deed, pay stamp duty (if applicable) and set up a bank account and books.
What are the different types of trusts?
The five most common types of trusts are fixed trusts, unit trusts, hybrid trusts, discretionary trusts and testamentary trusts.
a- What is a fixed trust? A fixed trust sets to the class to whom the income is to be distributed to is fixed and so are the percentages of the income stream.
b- What is a unit trust? A unit trust means the unitholders own units of the trust but do not own any particular asset in the trust. The units can be divided into different classes so the revenue and taxable capital gains can be separated and streamed to different unitholders.
c- What is a hybrid trust? A hybrid trust is a custom made trust which can incorporate any of the features of the other trust types.
d- How does a family trust work? A family trust is a flexible type of trust known formally as a "discretionary trust". The trustee has the power to decide to whom to distribute money and property from the trust. This structure is popular with family businesses and families because trust property is not available to the beneficiary's creditors (in business or marriage breakdown) and income splitting is available flexibly.
e- What is a testamentary trust? A testamentary trust can be created in a person's will.
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The Legal Enablers Team