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Having lots of “things” - both money and property – is awesome, but losing them if something goes wrong is not. Even worse, if a relationship or business goes down the tubes, you can lose everything that you have worked so hard for! That’s why it’s a smart idea to set up a family trust which can help protect your assets for the future benefit of your family.
What is a Family Trust?
A family trust is a special way of protecting your assets for the benefit of your family, before and even after your death.
To set up a family trust, a person that we call a “settlor” creates the family trust, and has the authority to appoint and remove “trustees”, who are the people responsible for the management of the trust. The settlor can be you personally, or somebody else that you trust. You then have the ability to sell your assets to the trust. Your family trust will then own those assets, instead of you. The assets that can be transferred into the trust include family homes, shares, cash – even precious artwork! But don’t worry – even if the assets are owned by the trust, you can still enjoy and benefit from them, as part of the trust arrangements.
The settlor appoints people that they trust to be the trustees and they will be the ones looking after the Trust assets until the Trust is wound up. When the Trust is wound up, the assets are distributed to your chosen beneficiaries – these are the people that you ultimately wish to benefit from the trust, and are commonly family members such as your spouse, your children and your grandchildren. This usually happens either after your death, or the death of your surviving spouse, unless you leave instructions for it to continue. You can be both the settlor and a trustee, which lets you have a say in what happens to your assets, or you can choose to have other trusted people to be the trustees on your behalf. It is quite common to have an “independent trustee” to ensure that future decisions are made fairly and not solely for the benefit of one beneficiary over any others. Legal firms often have trustee companies set up for this particular purpose.
Why Should I Set Up a Family Trust?
A family trust can be used to:
How Does a Family Trust Work?
A family trust is set up with the main purpose of protecting your assets for your family. This could be a way to protect your family home if you go into business – just in case things go wrong, or to protect your children’s inheritance from being claimed by a future partner. You might have a family heirloom that you want to go to your children, or you wish to protect your family home so that it can be used after your death for the benefit of all of your children, without the danger of it being claimed as relationship property by one of their future partners – a family trust is set up to ensure that your assets stay around to be used for your family, even after you’ve passed away.
A lawyer is the best person to speak to about setting up a family trust – they can give you the advantages and disadvantages directly related to your specific circumstances and make sure that it’s the right option for you. They will guide you through choosing trustees and beneficiaries, as well as explaining the things which need to be done each year to manage your trust. When you set up a trust, you’ll also need to update your will to include a memorandum of wishes as to what you want to happen to your family trust should you die.
Disclaimer: The information on this page is general information only and must not be relied on as legal advice. Legal Beagle is not a law firm or a substitute for a law firm. We are unable to provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defences, options, selection of legal documents or strategies.
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