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Trusts: A form of Asset Protection

A trust is a legal arrangement where assets are held by a person or company, referred to as a trustee, for the benefit of others, such as you, your family, or your business. In addition to asset protection, trusts also provide significant tax-saving and wealth-creation benefits though because the benefits a trust can offer are diverse, such as passing your assets to future generations without any tax or stamp duty consequences and legally reduce taxes by distributing income to beneficiaries and other companies at lower tax rates. This article however will focus on a summary of asset protection of trusts.

One of the highest levels of asset protection that can be provided is to own assets in a fully Discretionary Trust. This is because the courts have long recognised that a beneficiary of a purely Discretionary Trust does not have a defined or contingent interest in any of the Discretionary Trust's assets, even though that beneficiary may control the Trust. Therefore, if a beneficiary is attacked by creditors, becomes bankrupt or is divorced, in most circumstances the Trust assets will not be at risk.

The legal title of your assets are held by the trustee, but all of the beneficial interests of those assets including income and capital still belong to you, your family, or your business.

This means that if you were successfully sued, only assets held in your name would be at risk. Assets held by the trust would be out of reach because the legal title of those assets are held with the trustee, not you.

As accountants we administer elements and audit trusts as a legal requirement, so look forward to being part of the processes. We at The Great Bean Counters look forward to helping you protect your assets, so give us a call for a chat.

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