Family Trusts: What Are They and When Should You Have One?
A family trust simply refers to a trust set up by a family group who wish to safeguard their collective assets. Such trusts can be used to provide tax benefits to the group in question, to protect assets from individual liability, or to ring-fence them for inheritance or investment purposes.
Read on to discover more and to decide if this type of trust is right for you;
Before getting down to the benefits of a family trust, it is important to establish a few key terms;
The trust deed is a document which outlines the provisions of the trust, and the terms and conditions it is bound by. This document will be signed by the settlor and trustee(s) before it becomes valid.
The trustee is basically the manager of the fund, the person who is trusted with certain executive powers and responsibilities as outlined in the trust deed.
The settlor is a third party, not otherwise involved in the activities of the trust. They are responsible for handing over assets to the trustee on behalf of the beneficiary.
A beneficiary is anyone named in the trust deed who can benefit from the assets and wealth held in the trust.
Family Trust Benefits, Explained
Family trusts enable beneficiaries to enjoy the following benefits;
When Is a Family Trust Useful?
Any family which has assets worth protecting or comes into a substantial amount of money is recommended to set up a family trust. Remember that there can be more than one trustee just as there will usually be more than one beneficiary so creating a family trust does not just sign over the family's assets to the control of one member.
It is difficult to predict when someone might get into financial trouble or when an inheritance may need to be paid to a family member in the next generation. As such, it is better to set up a trust when times are good. This will then act as a financial shield on rainier days.
If you think a Family Trust might work for your family's assets, first talk to your lawyer, accountant or financial adviser for more specific advice.