Advantages and peculiarities of opening a family trust 2022
If you want to keep assets in the family, protect them from third-party claims, and pass them to your successors without loss, you should consider having a family trust. This is the name of a type of contract in which the owner transfers the right to manage the assets to a trustee, and the income from it is received by the beneficiaries (family members) specified in the contract. So, registering a family trust in 2022 helps protect assets from creditors, distribute the income from assets to family members the way the trustee wants, and save money on inheritance when the trustee dies.
Features of a family trust
The trustee who will manage the trust must enjoy the absolute trust of the owner. The safety of assets directly depends on his/her actions. Also, the trustee receives a salary, the amount of which must be sufficient to resist temptation and cheating.
The beneficiaries who will profit are:
- the trustee himself;
- uncles / aunts and other family members.
A family trust can be revocable and irrevocable. In the first case, it can be revoked or amended at any time. In this case, the settlor can change the terms of the contract, revoke it, and appoint successors if he or she becomes incapacitated or dies. Upon the owner's death, the assets pass to the beneficiaries under the deed. Thus, the trust agreement serves as a bequest.
If an irrevocable option is created, another person must be appointed as an administrator, and the contract may not be changed. Therefore, all the terms must be carefully thought out when creating the contract.
The purpose of family trusts
The main purpose of a family trust is to minimize inheritance taxes after the death of the trustee. It also helps to protect the property from creditors, since after the conclusion of the contract it does not belong to the trustee. An important note is that this can only be done through an irrevocable contract.
Obligatory fulfillment of the will of the trustor
The trust agreement ensures that the assets of the trustor will be managed for the benefit of family members on his or her terms. For example, a person owns $5 million in assets, and he/she wants to distribute them among his/her children and grandchildren. In the contract, s/he can specify under what conditions and when they can access them (e.g., when they graduate from high school/university or reach the age of 30).
Protecting weaker family members
A trust agreement is relevant if there is a disabled child in the family. This option allows continuing to receive government disability benefits.
A will does not always allow the property to be divided the way the trustee wants. The agreement that is made when creating a trust takes this into account, and allows you to give certain items to the right people.
Protection from creditors
A trust agreement allows you to protect assets from creditors because the settlor no longer owns them.
Options for family trusts
- Spousal - takes effect after the death of one spouse. His or her couple's assets are placed in a tax-free trust, but can also be inherited (depends on the agreement). The spouse profits from the income, while the assets go to the children and grandchildren, etc. after his or her death. If he or she remarries, the deceased spouse's assets go to his or her children, not to the new husband/wife;
- Bypass trust - needed to reduce inheritance tax. It is an irrevocable option where the surviving spouse administers but does not inherit the property;
- Generation-skipping trust - transfers inheritance to grandchildren, with children accessing income without paying taxes;
- To prevent waste - restricts beneficiaries' access to assets to avoid waste. In doing so, family members get access to income and interest from the assets;
- Trust testamentary - beneficiaries do not get access to assets after the death of the settlor until a certain time.
How to open
To open a 2022 family trust, contact the IT-OFFSHORE experts. We can help you choose the jurisdiction where it’s best to open a family trust. We will also help you to determine which form to choose taking into account your case, and to draw up a document correctly.