A Beginners Guide to Trusts

Why is everyone talking about trusts?

You’ve probably heard a lot about trusts over recent years. Trusts have become an increasingly popular way to protect family assets and safeguard the financial future of dependents and can give rise to tax benefits.

What you may not have realised is that your business can be operated in a trust or your company can be owned by a trust. There are some very sound reasons for considering the relevance of a trust for your business, but before we consider them it’s worth taking a moment to think about your general attitude to ‘ownership’.

“I don’t want to lose control.”

It’s a common trap to confuse the issues of ownership and control. You may think that by surrendering ‘ownership’ of your business or company to a trust, you are also surrendering ‘control’. This is not necessarily the case. A well designed and managed trust not only protects your assets from risk, but may also allow you to have a say in the management of those assets.

Basically, it’s simple.

If you are the person or persons wanting to set up the trust (the Settlor) then you determine the rules of the trust (Trust Deed) and appoint Trustees who manage its affairs on behalf of the Beneficiaries of the trust. It is possible that the Settlor may also be a Trustee or Beneficiary. A trust can be structured in an infinite number of ways to suit your business and family needs. There is no formula to trusts. The most important first step, as always, is to get sound advice. That’s where PricewaterhouseCoopers can help.

The main advantages of trusts:

• A trust can protect assets from creditors.
• Assets held in a trust can be secure in the event of a matrimonial or relationship dispute.
• Trusts offer protection of family wealth even after your death.
• Trusts can be used for a specific purpose, e.g. your children’s education.
• Trusts are flexible business vehicles in comparison to some other options.
• The income of the trust is taxed at 33% as opposed to the 39% marginal individual tax.
• Tax may also be further reduced by spreading income between beneficiaries although recent legislation now taxes minor beneficiaries at 33%.