Basics You Need to Know About Family Trust

A Family Trust refers to a structure that is created to benefit people who are related either by blood, law or affinity. For instance, it allows parents to transfer their assets directly to their children, thereby preventing automatic inheritance by relatives. By transferring your assets' legal ownership to the trust, you ensure that they're protected, while still being able to enjoy them. Here's an in-depth look into what a trust is for, who it's useful for, its main features, as well as benefits

Why a Family Trust?

Establishing a trust makes it possible for your assets not to be considered ''yours'' when it comes to determining your asset level. If you are in need of rest home care for instance, and your assets total amount exceeds the threshold set by the government, you'll be required to contribute to your care costs till they are reduced to the threshold amount. But if you transfer your properties to a trust, your asset level will be significantly reduced, enabling you to benefit from the fully subsidized government care, while at the same time keeping your cash reserves.

You can also use a trust to build up your retirement benefits, which in turn places you in a better position to handle financial difficulties in the future. It’s also useful for reducing the taxes charged on your total annual income.

Who is it Useful for?

· People who would like to protect their assets from creditors.

· Property owners with many properties who want to efficiently manage their land tax.

· People with relationship problems who want to protect their assets.

· Farmers who wish to transfer the ownership of their lands to their children, while still being able to manage them.

· Seniors in care centers who want to reduce their income-tested fee.

· Business people who wish to protect their family properties against a possible failure in their business ventures.

The Main Features 

There are three main parties to a trust, and they include settlors, trustees, and beneficiaries.

• The Settlors
  

These are persons who transfer their properties to the Family Trust for the purpose of benefiting their loved ones. The assets' worth may be as little as 1$, or as much as millions of dollars.

• The Trustees
  

These are persons who are responsible for managing the trust carefully. Usually, there are two or more trustees of a trust. A settlor can decide to choose trustees whom he or she trusts. It's always advisable to select someone who is unrelated to you like a family lawyer, accountant, friend, or a corporate trustee.

• The Beneficiaries
  

These are the people who are to benefit from the family trust. Their names are usually written down, or simply stated as children, or grandchildren. There are 2 types of beneficiaries: discretionary and ultimate beneficiaries. 

Discretionary beneficiaries have the right to be considered for payments by the trustees, however, they have no automatic rights to be given payments from the trust. Ultimate or final beneficiaries on the other hand, have legal rights to the trust property at the time the trust ends. They are usually the children of the settlor and are named. If a settlor's child dies prior to the end of the trust, the ownership is transferred to his or her child (the settlor's grandchildren).

A trust is established through a written agreement called a trust deed, which has the terms and conditions under which the trust is created. Usually, there's no requirement to register it, and it becomes valid the moment it's signed. It's solely up to the settlor to decide who to make his beneficiary; he can decide to add the entire family, or choose to donate his assets to be used for charity work. 

Benefits of a Family Trust

There are several reasons why people set up a trust. It helps to:

· Protect family assets against creditors and potential business failure. When you transfer the ownership of some or all of your assets to a trust, you can confidently undertake a high-risk venture or occupation, knowing that your properties won't be put at risk.

· Put aside some money for special reasons like the education of your children or grandchildren.

· Protect your family members from unwanted claims on your properties when you die i.e. former partner or distant relatives who may want to contest the trust deed in order to benefit themselves.

· Ensure that certain assets like a family business, or land is transferred to your children intact.

· Ensure that your properties are properly taken care of. For instance, if you are hospitalized or too old to manage your own assets, putting them in a trust can help ensure that they are properly cared for, and are retained within the family.

There are several benefits that come with transferring a personal property in a Family Trust, as you've seen above. It's a great way of securing your children's future after you are gone or simply making sure the assets do not end up in the wrong hands. Another great news is that now you can obtain all the paperwork for the fund with just a few clicks.