Family Trusts

We may come across various family trusts all around the world - some doing charitable work and others having altogether different purposes, such as tax benefits. However, not all of us know that actually, "family trusts" is not a legal term. It's absolutely descriptive term signifying that the beneficiaries of the trust would be the family members of the person starting the trust. The family trusts are simply discretionary trusts set up to hold family's assets or to conduct a family business.

Inter vivos family trusts are those trusts under which the person initiating the trust is allowed to transfer his or her assets while still being alive. Similarly, a family trust can also be formed upon a will, i.e., testamentary family trusts.

The benefits of establishing family trusts are immense. The most common consideration in establishing a family trust is to make provision for the family, particularly children and disabled family members. Another relevant benefit is to protect the family assets from the actual and potential creditors. Family Trusts are also a great tool in tax management, and saves a lot of money going to the government in the form of property tax. Some folks also intend to create family trusts in order let their children reap the benefits of the property for a long time.

Family Trusts provides a useful mechanism to pass family assets to future generations. If you are having immense property at your disposal, it makes sense in having a family trust in order to have centralized and effective management of all the property.

However, substantive costs involved in setting up a family trust may prove a dampener in the plans of many people. The legal and administrative costs are usually on a higher side in order to establish family trusts.

The working of family trusts is not something special or different from other trusts. They also make investments in shares, properties, etc. However, it must be noted that trusts can be busted. If the courts feel that a fraud is being perpetrated in the name of trust, it can very well order its dissolution. Moreover, one must remember that any future property made out of the savings of family trust money will be treated as trust property, and shall be subject to same regulations.

Trust formation is a legal exercise and it is no different for establishing family trusts. Therefore, it makes sense if you seek legal opinion before finalizing your plans of establishing one.