One should really ask 'Why not create a trust?' There are many reasons why a person would choose to set up a Trust, and there is no one-size-fits-all Trust structure.
In a nutshell, a Trust is a relationship where an individual or corporation (the Trustee) holds property or assets for a specific person or group of people (the Beneficiary or Beneficiaries). The Trust Document spells out the rules the Trustee must follow in relation to that property.
There are many reasons why someone would want to set up a Trust. There is a widespread misconception that Trusts only benefit the wealthy by protecting their business assets, however Trusts have a wider purpose: they serve as an inventive and practical tool that can protect a range of personal and family assets. Below are a few reasons which illustrate the benefits of having a trust:
- Small businesses can draw on funds sitting in a family trust which could go towards investing in capital and also protect a business owner's personal assets from their business assets;
- Trusts may have a favourable role when family members are subject to different tax rates, by distributing funds in the most tax advantageous manner. The amount of tax a family pays can be reduced significantly, which provides the family with an opportunity to create wealth more quickly;
- A Family Trust is regarded as a distinct entity, and the assets within the Family Trust are generally protected, as opposed to a Will, which may be contested;
- Unlike companies, Trusts have low compliance costs.
If you would like to take advantage of these benefits, it's important for your Trust to be set up correctly, and the documents prepare by someone qualified to do so. It is also important that your Trust documents be regularly reviewed and updated as necessary.
To discuss the type of Trust that would best suit your personal circumstances, contact Pathway Lawyers & Migration Agents to arrange an appointment with our Trust professionals.