A Private Trust is a lawful contractual arrangement where a trustee manages assets for the wishes set out by the grantor. It can be used for a variety of purposes, in this case we’re discussing legacy protection. A Private Trust for the purpose of retaining assets and wealth within a family is created to protect the wealth for generations to come and avoid depletion from unnecessary transfer duties, inheritance taxes and courts fees in probate. This holds for as long as the assets remain in the Trust and are not brought back into the statutory realm or sold with the proceeds being distributed outside the Trusts protection. Should either of those occur then the beneficiaries are responsible for their own liabilities and obligations if they use their PERSON/Citizen legal entity to receive the assets or funds.
In this Note, we briefly discuss the benefits of using a private trust for legacy protection and the basic steps you can take to create one.
Benefits of Using a Private Trust for Legacy Protection
- Asset Protection: A private trust can protect assets from creditors, lawsuits, and divorce proceedings. By transferring ownership of your assets to the trust, you can ensure that there is no risk of being seized or sold off to pay debts or settle legal disputes.
- Estate Planning: A private trust can help you plan your estate by ensuring that the assets are distributed according to your wishes after your death. You can specify the distribution of assets to your beneficiaries, including charitable organizations, in the trust declaration.
- Tax Savings: By setting up a private trust, you can take advantage of tax benefits, such as reduced estate taxes and avoidance of probate fees. Probate is the legal process that distributes your assets after your death, and it can be time-consuming and expensive.
- Confidentiality: Private trusts are not publicly recorded or registered, so the details of the trust, including the assets held and the beneficiaries, are kept confidential. This provides a level of privacy that is not available through most estate planning options.
- Continuity: A private trust can provide a sense of continuity for your family and friends after your death. It allows your legacy to continue beyond your lifetime, providing support and security for your loved ones.
Steps to Creating a Private Trust
- Choose a Trustee: The trustee is responsible for managing the trust and ensuring that it is used for the benefit of the beneficiaries. You can choose a trusted family member, friend, or professional trustee such as a bank or trust company.
- Define the Purpose of the Trust: This will determine the types of assets that can be held in the trust and the restrictions on their use. For example, you may want to create a trust to provide for the education of your children or grandchildren, or to support a favourite charity.
- Identify the Beneficiaries: The beneficiaries of the trust, including any charitable organizations, will be those that can receive income, grants, loans or use of the assets. You should consider their current and future needs when determining the distribution of assets from the trust.
- Transfer Assets to the Trust: Transfer ownership of your assets to the trust by retitling them in the name of the trustee. This can include real estate, investments, personal property, and other assets.
- Draft the Trust Agreement: The trust agreement is a lawful contractual agreement that outlines the terms of the trust, including the purpose, trustee responsibilities, distribution of assets, and any other conditions or restrictions. It is important to work with an experienced trust creator to draft a comprehensive and effective trust agreement.
- Fund the Trust: Fund the trust by transferring assets into it. The trust agreement will have a supporting guidance for the trustee via a Letter of Wishes, which outlines the grantors intentions for setting up the trust, the assets with management guidance and who benefits from the increase in value and/or use of the assets.
- Review and Update the Trust: Regularly review and update the trust as needed to ensure that it continues to meet your needs and the needs of your beneficiaries. This can include changes in the law, changes in the beneficiaries’ circumstances, or changes in your own wishes.
In conclusion, a Private Trust should never be viewed as a tax avoidance scheme, anyone looking to use it as such has completely missed the point and will not benefit from being a Cbf client.
A Private Trust is a unique stand alone entity that if managed correctly can be used to enhance the generational wealth of a family and protect the legacy that is passed from generation to generation. The positive impact ensures that a household can build wealth as a unit safe in the knowledge that their lineage will continue to manage the estate as laid down in the provisions of Trust thus preserving the property and assets in perpetuity.