TRUSTS - GENERAL INFORMATION
Trusts originated in England at the time of the Crusades, during the 12th and 13th Centuries. At the time, land ownership in England was based on the feudal system. When a landowner left England to fight in the Crusades, he needed someone to run his estate in his absence, often to pay and receive feudal dues. A landowner would give a piece of land to a friend to "hold on trust" for his descendants thereafter in the event that he didn't return. Another benefit of this arrangement was the trust avoided paying dues as the land passed from fathers to eldest sons, through the generations because it was the beneficiaries of the trust that changed not the ownership of the property
Modern trusts are far more evolved and sophisticated than these early primitive trusts.
A trust is a legal arrangement in which money or property is managed by one person (or organisation) for the benefit of another. A person or company agrees to hold assets for the benefit of another.
The one who holds the assets is called the Trustee; those who benefit are called Beneficiaries. The trustee has legal control; it's the trustee's name that appears on all legal documents, bank accounts, etc. The beneficiaries are not mentioned on such documents and have beneficial ownership , meaning that they are entitled to the assets and profits of the trust. The basic function of a trust is to separate control and ownership.
One of the major benefits and functions of a trust is asset protection. Asset protection means what it sounds like. It doesn’t involve structuring affairs to lessen tax, asset protection provide an orderly transmission of property between generations, although it may have certain tax advantages.
It’s something one does at the start of a business enterprise (or possibly a marriage) involving some risk to make sure that if the worst happens, the creditors can’t take everything you’ve got.
There are many different types of trusts.
- Discretionary trusts
- Unit trusts
- Hybrid and
- Bare trusts
Just to name a few. Click on the links above to learn more.
The important thing to note is that different trusts are used for different purposes. There is no 'one-size- fits-all' when it comes to structures.