Trust

 

A trust also gives you a flexible, tax efficient way to arrange for specific assets to be held for the benefit of others.

 

Through DFM’s Trust Management Service, we will help you select the most suitable kind of trust for what you want to achieve.

As part of this service we will:
Introduce you to our specialist trust department, which has over 10 years’ experience of managing trusts,
Provide practical knowledge of trust and tax administration
Handle all the paperwork and ongoing management on your behalf.
A trust is an arrangement under which one person, known as the "settlor" transfers assets to another person, known as the "trustee", and instructs the trustee to use those assets for the benefit of other persons who are known as the "beneficiaries". Beneficiaries are usually members of the settlor’s family. A beneficiary can, however, be any person nominated by the settlor.
The settlor’s instructions are contained in a written document which is called the "trust deed" and this ensures that the settlor, the trustee and the beneficiaries know precisely what their respective rights and duties are. It also contains "rules" which set out precisely what the trustee can do and, if necessary, the Courts will act to ensure that the trustee abides by these rules. The principle which underlies all of the rules is that the trustee must always act in the best interests of the beneficiaries. Thus the trustee has the legal ownership and control of the assets but may not enjoy them himself - that enjoyment is for the beneficiaries only.
Some of the advantages of establishing a trust include:

  • A flexible way to provide for the succession of family wealth and to protect future generations against the ravages of, for example, divorce or to secure the financial future of younger family members.
  • Trust assets are protected against the claims of the settlor’s and beneficiaries creditors.
  • A trust will ensure that family assets are retained within the family.
  • A trust can protect against the financial hardship that can arise upon the disability or death of a family member.
  • A trust entirely avoids the public, costly and time consuming legal formalities associated with the transfer of wealth upon the death of the settlor.
  • A trust can allow for the transmission of wealth in a manner other than which may be prescribed in some countries (i.e. avoiding forced heirship).
  • A trust can be of assistance in planning for the legitimate minimization of taxation, particularly for those with international wealth.
  • A trust can provide protection against the repatriation or seizure of assets.
  • A trust can protect the financial future of spendthrift or irresponsible family members.

In summary a trust is an excellent and flexible vehicle for managing and maintaining wealth and protecting the financial future all family members.

 

 

  

 

Brief Synopsis of the use of a Discretionary Trust

 

 

The formation of a discretionary trust and the subsequent transfer of a Settlor’s assets into that trust effectively guards against future attacks against his wealth because he has severed his legal right and control over those assets.
The concept of a discretionary trust is that the trustees will hold the assets transferred to them on behalf of the nominated beneficiaries during the Trust period. The deed is prepared to embody the following:


1. The name of the settlor;
2. The names of the beneficiaries;
3. The terms and conditions and powers of the trustees.

 

The trust becomes effective upon the signing of the document by both the settlor and the trustees.
In certain jurisdictions. there is no requirement to have the document registered and therefore it is not available for public inspection.
The usual terms of a discretionary trust vest the distribution of both capital and income in the complete and unfettered discretion of trustees. It should therefore be understood that although the settlor may be included as a beneficiary he has no legal right to direct the trustees in the exercise of their discretion.
However, in administering a discretionary trust, the trustees would normally require guidance from the settlor as to the distribution of capital and income which is usually undertaken by the use of "a letter of intent" given by the trustees to the settlor. This letter may be amended from time to time or totally rescinded. It is of course understood that in normal circumstances the trustee would have full regard for its content. The letter of intent is an informal document and does not form part of the trust deed. That has the advantage that it is not apparent from the main trust document which of the discretionary beneficiaries is ultimately to receive benefit from the trust funds or in which proportions.
It should be understood that the above is merely a brief synopsis of a standard formal type of discretionary trust. It is not intended to be a definitive explanation of every type of trust since trusts can be drawn in varying and wide forms.