What is a Trust?

What is a Trust?

A Trust is a legal arrangement which involves a person (the “Settlor”) transferring legal title to assets to another person or body (the “Trustees”) to hold for the benefit of one or more persons (the “Beneficiaries”), which may include the Settlor.

What are the potential advantages of a Trust?

• Security
  A Trust is a well-recognised legal structure for holding assets.
   
• Stability
  A Trust can give a degree of protection to assets, in respect of economic and political changes elsewhere in the world.
   
• Flexibility
  A discretionary Trust is extremely flexible, and can be administered so as to take into account changes over time in family and fiscal circumstances.
   
• Confidentiality
  The assets are held in the name of the Trustees, not in the names of the Settlor or the Beneficiaries. The Trust accounts are private, and do not have to be filed with any public authority.
   
• Tax planning
  If created and operated with care and with appropriate advice from tax experts in the relevant countries, a Trust can mitigate tax. For example, it may be tax-effective if created before you emigrate to another country.
   
• Estate-planning
  A Trust avoids cumbersome legal procedures after your death regarding the transfer of assets from your personal estate, and provides continuity for future generations. It may in some cases help to avoid taxes which arise on death.
   
• Family asset management
  A Trust can provide a centralised asset management structure for Beneficiaries who are not in a position to manage assets themselves.
   
• Asset protection
  This is a function of most Trusts, but some Trusts are created specifically to shelter assets from potential creditors, although care must be taken in all cases to ensure that no transfers of property into trust are made in such a way as to prejudice any known creditor claims.
   
• Consolidation of assets
  A Trust can be used to centralise the holding of assets scattered around the world.
   

How do I create a Trust?

The Trustees and the Settlor (or sometimes the Trustees alone) sign a document (the “Trust Deed” or
“Trust Instrument”) which sets out the terms of the Trust, including the details of the Beneficiaries and the powers and duties of the Trustees. Assets are then transferred to the Trustees.

How long does it take?

The Trust Instrument must be carefully reviewed and fully understood by the Settlor before it is signed. The creation of the Trust therefore usually takes several days and our normal procedures allow for a fourteen day period. Trusts are generally established with a modest sum of cash, with the main assets added subsequently.
 

Can I be a beneficiary?

Yes, but the tax consequences for you of doing so will need to be carefully reviewed first, with your own advisers.

What assets can I put into a Trust?

Trustees usually hold assets such as cash, investments, houses, or works of art. They often hold shares in private companies. They can also hold other property rights such as patents or copyrights. For tax or commercial reasons, Trust assets may be held by an offshore company owned by the Trust, rather than directly. Further assets may be added to the Trust at any time after its creation.

What safeguards are there?

Trust law imposes strict duties on Trustees, who are fully accountable to the Beneficiaries and are not permitted to receive any benefit at all unless the Trust Instrument expressly permits it. A Trust can also have a Protector, who is not a Trustee, but whose consent is required before the Trustees exercise certain key powers, such as making a distribution of capital. The Settlor's family friend or personal adviser may be appointed as Protector, to keep an eye on the Trust after the Settlor's death and to advise the Trustees on family circumstances.

Can I change the Trustees?

The Trust Instrument typically contains a power to appoint new Trustees. The Trust Instrument may state that this power is held by you, by the Trustees or by someone else such as the Protector. The Trust Instrument will be drafted to reflect your requirements in this regard.

Am I still in control?

Trust law requires that the Trustees must manage the trust property and administer the Trust themselves, and exercise their own discretion. However, you can set out for the Trustees your broad preferences as regards the management of the Trust, in a letter of wishes, which you can change at any time. Your letter of wishes is usually confidential between you and the Trustees. Whilst the Trustees will not be legally bound to act in accordance with your wishes, they will take them into account and will usually act in accordance with them if it is within their powers to do so. At any time you can request the Trustees to act in a certain way, and whilst they are not bound to do so they will take those wishes into account. So whilst you will not be in control (and this is usually important for tax and other estate-planning reasons), you will have a degree of influence in respect of the management of the Trust.

Can I dictate investment policy?

The Trustees must make investment decisions, but the Trust Instrument can in some cases contain certain powers for investment directions to be given by the Settlor (or a third party) to the Trustees. Whilst you will be consulted about investment strategy and your views and preferences can be followed where appropriate, the Trustees will normally appoint a professional investment manager selected from those approved by Investec Trust where investment management is required.

See the video below for how Investec Trust assists with this.
 

Investec Trust Investment Services

> 4 minutes 48 seconds                                           > For more Investec Trust videos, please visit our Media Centre

How long can a Trust last?

This depends on the governing law and the terms of the Trust. Investec Trust usually recommends the use of Jersey law, under which a Trust may be established for an unlimited period, although a fixed period, such as 100 years, may be stated in the Trust Instrument, if appropriate.

What happens when I die?

The assets held by the Trustees will not form part of your estate, and will continue to be held for the remaining Beneficiaries as set out in the Trust Instrument, so there is continuity. The Trustees will take into account any wishes you may have expressed as to what you would like to happen after your death. You can also ask the Trustees to take into account, after your death, the wishes of someone else, such as your wife or the Protector.

How can the Trust be ended?

The Trust can be ended by distributing all the assets to the Beneficiaries.

More information

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The Investec Trust group of companies, part of the Investec Group, comprises: Investec Trust (Guernsey) Limited, licensed by the Guernsey Financial Services Commission, registered number 11453, registered office Investec House, La Plaiderie, St Peter Port, Guernsey, GY1 3RP; Investec Trust (Jersey) Limited, regulated by the Jersey Financial Services Commission, registered number 58347, registered office One The Esplanade, St Helier, Jersey, JE4 8UW; Investec Trust (Mauritius) Limited, regulated by the Mauritius Financial Services Commission; Investec Trust (Switzerland) SA, regulated by the Association Romande des Intermédiaires Financiers and a member of the Swiss Association of Trust Companies; and Investec Trustees (UK) Limited registered in England with company number 3731270, registered office 2 Gresham Street, London EC2V 7QP.  Investec Private Trust Limited, registered in South Africa with registration number 1937/009516/06, operates in conjunction with Investec Trust. Investec Private Trust Limited and Investec Trust (Mauritius) Limited are subsidiaries of Investec Limited which is listed on the Johannesburg Stock Exchange, and are not owned by Investec Bank plc. Please see the Investec Trust Website Terms & Conditions, Privacy Statement and Data Protection Policy.