What Are the Advantages of a Trust?

Because of its flexibility, a trust can be used to perform many different functions: to minimise or avoid tax liability, to facilitate lifetime financial management, to protect assets, to preserve family wealth, to ensure continuity of a family business, to donate to charities, to negate forced heirship laws, to create a pension scheme for employees or dependents.

• Minimise or avoid tax liability: Because it distinguishes asset control from ownership, the trust, in spite of the ever-increasing amount of anti-avoidance legislation, is still one of the most powerful tax planning tools available;
• Facilitate lifetime financial management: The use of a trust can effectively centralise an individual's financial affairs in a single vehicle, allowing for ease of management;
• Protect assets: Litigation and political instability are two of today's biggest threats to one's assets. An asset protection trust can do much to alleviate this problem;
• Preserve family wealth: Assets or business interests created over a lifetime can be protected against dissipation by providing for a plan of accumulation and orderly distribution amongst heirs;
• Continue a family business: Corporate structures can be effectively owned and administered by a trust, whilst providing for the distribution of income as needed;
• Donate to charities: A trust can administer income so as to accommodate the settlor's wishes with respect to charitable distributions;
• Negate forced heirship laws: Some jurisdictions make arbitrary heirship provisions, which may be contrary to the wishes of the settlor. A trust can be used to avoid such legislation;
• Create a pension scheme for employees or dependents: A trust can be an efficient vehicle for accumulating and distributing pension income amongst employees or family members.

Perhaps most importantly, a trust, or a trust in conjunction with a company or partnership, can be an effective estate planning tool or will-substitute. In all cases, competent advice should be sought in the country of the settlor's residence or domicile prior to creating the trust. The associated law firm of First Anguilla Trust Company Limited, namely Webster Dyrud Mitchell are always happy to work with a client's existing advisers.