Trusts
Setting up a family trust is certainly worth considering if you hold any assets, especially any real estate but before you do, it is worth acquainting yourself with how a trust works.
What is a trust?
A trust is a legal structure created by a relationship between three parties:
- Settlor – provides property to the trustee
- Trustees – has an equitable obligation to deal with property for the benefit of the beneficiaries
- Beneficiaries – persons who are entitled to benefit under the trust.
Settlor
The settlor is the creator of the trust. The settlor must not be a minor, must be of sound mind and can be a company.
Trustee
The trustee can be any person who can hold property. The trustee can be a company.
Any trustee is required to be acquainted with the terms of the trust and know what the assets and liabilities of the trust are.
Beneficiaries
Generally in a family trust the beneficiaries will be the immediate and perhaps extended family.
Discretionary beneficiaries will have no proprietary rights or claim in any trust property or income or capital until property is distributed to them by the trustees.
Why have a trust?
Principal reasons for transferring your assets to a trust include:
- You want to leave your estate to your heirs in such a way that everything does not pass immediately to them but they still receive the benefit of the assets.
- To protect assets against claims from creditors or lawsuits.
- To ensure assets are available to future generations of your family.
- To facilitate proper management of your assets.
- To avoid the cost, stress and publicity of obtaining probate.
How much does it cost?
Setting up a basic family trust usually costs somewhere between $1,500 and $3,000. This should include Wills and powers of attorney. The cost will depend amongst other things on the nature, complexity and extent of property being settled (or transferred) to the Trust. Bear in mind that planning and setting up a tailored trust structure well in advance can be priceless in the long term.
You may discuss or lodge a query about setting up a tailored trust structure with your lawyer, the Public Trust, financial adviser or accountant (or a combination of each). These parties may also advise you on wider asset protection issues and provide more detail about how a trust works.
This article has been written by Aman Prasad. A fairly cool lawyer.
