Benefits of a Family Trust - Part 1

Over the next series of blogs we will begin to talk about some of the benefits of a family trust. Everyone’s family situation is different and although we will talk about the majority of the benefits of a family trust, there are specific benefits that are only used in specific situations. For example we will not be discussing the fact that a trust, when set up properly, can shelter assets for marital purposes in the case that one spouse does not want to bring specific assets into a marriage relationship. This can be done in place of a prenuptial agreement. There are many uses and benefits of a family trust and it is always best to consult with us for your needs.

One of the biggest benefits of a family trust is Asset Protection. By growing assets in a trust, those assets can be protected from claims against the trustees and beneficiaries who will not be considered to be the owners of property in the trust, because the trust will be discretionary such that creditors of the trustees and beneficiaries possibly may not be able to seize, garnishee or otherwise attack such property.

This protection is from future creditors and claims, not pre-existing ones. For example, the transferring of assets into a discretionary trust prior to insolvency or bankruptcy will likely be subject to attack, depending upon the timing of the transfer.

When a trust is holding the assets, they are usually safe if the trustee or beneficiaries are sued for any reason. What you are doing by putting your assets into the trust and becoming the trustee is to “Control the assets without owning them” Typically the only way that someone can put a claim against the trust is if the trust has broken contract or caused damage to someone (an individual or a company). If you don’t use the trust for business purposes or contracts then this should eliminate the possibility of the trust being attacked successfully.

The Trust will hold assets such as:

• Shares of private corporations (ones that you run, or just own shares in)
• Shares of public companies (stocks)
• Real Estate
• Precious Metals (Bullion, etc)
• Investments
• Other valuable assets, or assets that you want to protect

The real key is to set up a trust and get the assets into the trust before a liability arises. It’s like when you buy fire insurance, you need to buy it before the fire…not after! Asset Protection is a major benefit of a family trust, however there are many more benefits that we will discuss in my next blogs!