We are asked a lot about trusts. Clients often want to know if they should set up a trust, or whether their current family trust is suitable for their new property investment ventures. Each situation is unique, and we always recommend our clients discuss their asset planning with a trusted professional. We can offer the following information, though, as a general introduction to trusts.
Trusts are generally set up to hold and protect your assets from threats such as bankruptcy, family disputes, and hostile creditors.
When a trust is set up, a trustee or trustees are appointed to control the trust and its assets. A trustee could be a person or a company. A trust deed is written. This sets out the ground rules and intentions of the trust, including, for example, the powers of the trustee and any restrictions about how the trust assets can be invested. It also sets out the beneficiaries, who are the people who will ultimately benefit from the trust assets.
Trusts generally have a lifespan of 80 years, unless terminated earlier.
Property held on trust is held for the beneficiaries. Because of this, it can essentially defeat claims from creditors and bankruptcy.
A word of warning, though: the protection a trust offers is not absolute, though. A court will assess claims to trust assets on a case by case basis.
Trusts are useful tools for property investors (and, indeed, anyone with assets to protect). It is vital to set them up properly, though. Before you transfer property or purchase property using a trust structure, get legal advice from a solicitor experienced in this area. We also recommend you talk to a financial expert to make sure your trust structure will not disadvantage you in terms of, for example, tax benefits.