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If you continue to treat the assets as your own, any trust could be open to challenge as a sham.Īdditional administration – If you establish a trust, you need to allow for the time and cost involved with meeting the trust’s annual accounting and administrative requirements.Ĭost of formation of the trust and the transfer of assets – There are costs involved with establishing a trust. Although you can retain some control by holding the power to appoint and/or remove trustees, or even by being a trustee yourself, it is important to remember that assets you transfer to the trust are no longer your own. Loss of ownership of assets – If you transfer your personal assets to a trust, then the trustees of that trust will control the assets. The following are a number of the disadvantages of having a family trust: General flexibility to deal with law changes – Modern trust deeds normally allow limited rights of variations to deal with changes in the law.Ĭonfidentiality – Family trust are not publicly registered and therefore can be kept confidential.
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However, the Court cannot rewrite your trust for Family Protection Act purposes. Reducing or preventing claims against your estate – The Courts can effectively rewrite your Will under the Family Protection Act 1955 if it considers that members of your family have been disadvantaged by its provisions. Protecting assets for future generations from potential tax law changes – Family trusts may provide protection against various forms of wealth tax that may be introduced in the future, such as death duties or inheritance tax. This can protect the long term value of your family’s assets. If you give your assets to a family trust, then the trust can provide a vulnerable child with income and/or capital to meet their cash requirements as they arise. Protecting property from or for beneficiaries – You may be reluctant to simply give your assets to your children during your life or on death if you have concerns about their ability to manage their financial affairs. However, if your assets are owned by a trust, or are given to your trust on death, your children can continue to receive the benefit of those assets but the assets do not form part of their personal property, and therefore cannot be subject to claims by your children’s partners.įurther, if assets are transferred into a family trust prior to entering into a relationship, the assets in the trust are less likely to be subject to a relationship property claim at the end of the relationship. Protection against relationship property claims – If you give personal assets to your children during your life or in your will, those assets may, in certain circumstances, become available to their partners under the Property (Relationships) Act 1976. In most circumstances a trust protects those assets from personal liabilities. A usual situation in New Zealand is where the parents have personally liabilities (often related to their business interests), and wish to protect their family home from such liabilities in the event they are unable to meet them. The following are some of the advantages of setting up a family trust:Ĭreditor protection – assets held in trust are usually protected from creditors of the beneficiaries, or the trustees personally. Primary beneficiaries, who are discretionary beneficiaries given some sort of priority ahead of other beneficiaries. The beneficiaries, who receive the benefits from the trust.ĭiscretionary beneficiaries, who may receive a benefit at the discretion of the trustees įinal beneficiaries, who are entitled to whatever funds are still left in the trust when it is wound up and The trustees, who hold title to the trust assets in their own names and deal with them as instructed in the trust deed and
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A family trust is therefore a relationship involving:Ī settlor, who creates the trust and decides what goes into the trust deed and What is a Trust?Ī trust exists whenever one person, a settlor, gives property to another person, a trustee, to hold for the benefit of a third person, a beneficiary. This article looks at the advantages and disadvantages of family trusts. There are a lot of things to take into consideration. It can be a difficult decision whether or not to set up a family trust.