By Mr Lee Chiwi
Excerpt from PreceptsGroup Succession and Trusts in Wealth Management (4th edition) Book
Reasons for Setting Up a Trust
There are many different reasons why your client may consider setting up a trust. The following are examples:
- To make adequate provision for the client’s family in case of unforeseen circumstances.
- Preservation of wealth within the family.
- To prevent heirs who lack the financial maturity from squandering away their inheritance.
- Protection and provision for infants, special needs or vulnerable persons.
- To Assist in tax planning. Setting up a trust may help to reduce tax liabilities.
- To make a gift with conditions based on the client’s wishes or the beneficiary’s circumstances.
Guidelines and Benefits of Trusts
Guidelines could be drawn up on how the trustees should deal with the trust, and at what age and in what circumstances the intended beneficiaries could have full benefit from the trust.
Asset Protection where assets settled under a trust would under certain conditions be free from creditor attack or be under a liability used to pay off the debts of the settlor or beneficiary.
To mitigate estate duty, where it might be applicable in the jurisdiction concerned.
If the client feels that an outright lifetime gift is not appropriate, the trust is one way to achieve such purposes.
Avoidance of Forced Heirship rules. In this connection, to provide benefits to heirs who might otherwise not be able to benefit from the settlor’s estate at death because of restrictions on how his estate is to be disposed.
Objectives of Setting Up a Trust
The objectives in setting up a trust can also roughly be summarized under six heads:
- Economic, Tax and Estate Duty Minimization
- Succession and Inheritance
- Wealth Preservation and Enhancement
- Maintenance and Provision for the family
- Asset Protection and Avoidance of Potential Adversity
- Philanthropic, Charitable and Esoteric purposes
