Trusts remain a very useful and effective legal structure for many purposes. They are not a tax avoidance scheme, although one of the results of their use is often to reduce the total amount of tax payable. This will, in all probability, continue to be the case after the proposed changes to the taxation system that will see trusts taxed as companies.
Family or Discretionary Trusts are used to allow one or two people (usually the parents) to utilise a fund of money for the benefit of the entire family, to invest, and accumulate assets, and to provide money and services to the individual members of the trust (known as Beneficiaries). These beneficiaries do not directly own the assets and money in the trust, and cannot force all or any of the money to be paid to them. If one of the beneficiaries were to get into financial trouble, assets in the trust cannot (except where the trust has been set up to avoid creditors) be taken by the creditors.
Unit Trusts are more common in a business context, and are often used in conjunction with Discretionary Trusts. They provide for a fixed percentage of assets and income to be paid to the beneficiaries. There is no discretion with these trusts, and so each beneficiary can be confident that they will receive exactly their entitlement each year.
Hybrid trusts are a combination of unit and discretionary trusts in one. They are useful in certain limited circumstances.
We also advise about, and provide, specific purpose trusts - for example as the controlling document for a self managed Superannuation Fund.
We provide advice about when the use of these structures is suited to your needs, and prepare all the paperwork, and look after all the legal technicalities to set up a trust.
When considering making changes to any existing trusts, make sure that you consider Stamp Duty.