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Trusts Guide - Why form a Trust
Tuesday August 4, 2020


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There are a number of reasons why people choose to set up Trusts, whether it is for risk management and asset protection reasons or for family or other reasons.  It is important that individual circumstances are considered carefully because everyone’s circumstances are different.

Some of the reasons include.

Preservation of family assets

  • Invariably the primary reason behind every Trust is the genuine desire to preserve hard earned family assets for children and grandchildren

Family Protection

  • To protect assets from claims by undeserving children in certain circumstances
  • To provide for the needs of dependants without giving them the right to demand money or capital
  • To provide flexibility to cater for the needs of beneficiaries at various times in their lives (i.e. children and grandchildren) – a trust can last for up to 80 years
  • In your will you have certain legal obligations to next of kin and omission from a will can give rise to claims against estates under The Family Protection Act.  However, if on your death, certain assets are owned by a Trust, then they do not form part of your estate and are less likely to be subject to such claims

Relationship Property matters

  • Having property in a Trust presents a more “comfortable” option to some people than the alternative, a ‘pre nuptial’ or Section 21 agreement
  • To cater for children of a particular relationship separately. A Trust can enable you to cater for those children whilst still recognising obligations to children from other or subsequent relationships
  • To ensure that the husband, wife or de facto partner of one of your children is not able to gain any interest in family assets upon the failure of a relationship


  • To protect family assets from new laws which may introduce such taxes as capital gains tax, wealth tax, reintroduction of estate duty, succession tax and inheritance tax
  • To enable flexibility in income distribution thereby enabling effective income splitting among beneficiaries at the lower marginal tax rates (however there are new tax laws which tax ‘minors’ – children under the age of 18 years – at higher marginal rates)

Creditor protection

  • To protect assets from being at risk to possible creditors and from unsecured business debts

Risk Management

  • Used in conjunction with companies, trusts may be used to ring fence assets such as intellectual property (patents, trade marks, registered designs, and trade secrets) by having the ownership of such assets separate from their trading activities associated with them.

Protection from user pays charges

  • To increase the likelihood of qualifying for certain income or asset tested benefits such as rest home subsidies, child support, student benefits etc, by removing ownership of assets and or income producing assets from yourself and putting them in the Trust


  • Trusts, unlike companies, are not a matter of public record and do not need to be registered thereby enabling the extent of the trust assets to be kept confidential


  • Trusts are flexible and can therefore cater for unforeseen and differing needs of beneficiaries at various times
  • Trusts can also be used in conjunction with other entities such as companies to limit liability and channel income to beneficiaries at their respective marginal tax rates


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