Friday, 30 September 2016

Four reasons to invest in Trusts

Trusts have traditionally been shrouded in mystery to many people, leading them to be viewed with suspicion and viewed as little more than tax avoidance devices or worse, part of a tax evasion strategy.

However, trusts continue to be used by many of the world’s wealthiest families because in actual fact, trusts have several legitimate benefits.

It is perfectly normal not to want everybody to know details of an individual’s personal circumstances (do you tell everyone your salary?) and Trusts are a good way of achieving this. The Trustee is the owner of the assets held within the Trust and the deed forming the Trust is a private document between the parties to it. As such, you cannot “see through” the Trust to see the ultimate beneficiaries.

Probate Avoidance
In most places in the world, when someone dies it is a lengthy and expensive process getting control of the deceased’s assets so as to act on the terms of any Will.The presence of a Trust means this is avoided. The Trustee owns the assets and so a Grant of Probate/Representation is not needed.

Succession Planning
If on the death of an individual beneficial owner, shares are divided between the children and surviving spouse, disputes and disagreements can arise over the running and direction of the business. Additionally, loss of ownership of the business can arise in the event of a divorce, introducing “third parties” into the mix. This, coupled with inadequate training of the second generation, means that Family owned businesses typically struggle to survive past two generations. By having the shares owned by a Trust, the control and ownership can be centralized and continuous and the Board of Directors can run the company without fear of shareholder disagreement and interference.

A lot of the world’s international family-owned businesses are carried out through multiple jurisdictions and operate across various industries and sectors. Trusts can be used as the ultimate owning entities for these complicated structures. Here, the Trustee has an oversight role and has the perfect “helicopter” view to ensure the relevant resources are directed where needed and distributions can be made to family members as required.

Neil Stokes, a partner at Just Service, is a UK Chartered Accountant.

He was for many years a partner in medium-sized Accountancy Practices dealing with these issues on a regular basis. If you feel you need more advice on the subject please contact us and he will be happy to assist in any way he can.

Disclaimer: All content provided on this page are for informational purposes only. Just service Hong Kong makes no representations as to the accuracy or completeness of any information on this page or found by following any link on this page. Just Service Hong Kong will not be liable for any errors or omissions in this information nor for the availability of this information. Just Service Hong Kong will not be liable for any losses, injuries, or damages from the display or use of this information. This policy is subject to change at any time.

Just Service Hong Kong is a member of the Hong Kong Confederation of Insurance Brokers in Hong Kong, transacting Long Term (including linked long term) Insurance business. Nothing in the comments above should be taken as offering investment advice or making an offer of any kind with regard to financial products or services of any kind. It is therefore important to reinforce that all comments above are designed to be general in nature and should not be relied upon for considering investment decisions without talking to licensed advisers.

No comments:

Post a Comment