TRUST & FIDUCIARY

A trust is an arrangement through which the owner of an asset (known as the Settlor) legally transfers ownership of the asset(s) into the Trust. Trustees subsequently administer the assets subject to the terms of the Trust Deed and in accordance with the Settlors wishes, for the benefit of an individual or group of people, known as Beneficiaries.

You can settle a range of things into a trust but the most common assets, include:

• Cash
• Shares
• Real Estate
• Land
• Luxury assets i.e. yachts, aircraft 
• Personal items i.e. art, jewellery, cars
• Investments
• Life Insurance Policies 
• Pensions
• Securities

The Trust Deed is a key requirement to setting up a trust. For this reason, it is advisable to engage either a lawyer or a licensed trust service provider who will be able to coordinate the drafting of a Trust Deed, establish the Trust and act as Trustees of the same.

A Trustee is an individual or professional service provider with responsibility for administering the assets according to the Settlor’s wishes as set out in their Trust Deed or Will. They are also responsible for the day-to-day management of the Trust, including banking, making distributions, payments of taxes due etc.

An independent Trustee is a professional body with no connection to the Trust. Whilst it is not mandatory, it is highly recommended to have an independent third party act as Trustee, to avoid any potential bias or prejudice that could occur with a family member/friend acting as Trustee.

If engaging an independent Trustee, it is important to ensure that they fully understand their role and responsibilities – a licensed trust service provider is therefore advisable in this instance.

A Protector is not mandatory for the establishment of a trust but some people prefer to have one appointed. The role of the Protector is to ensure that the Trustees perform their duties accordingly and have powers of veto over Trustee decisions if they do not. Often the Protector will be a close family friend or professional advisor to the individual that is setting up the Trust.

A Trust Deed, also known as a Declaration of Trust, is the legally binding document through which the legal owners of the asset(s) declare that they hold the property on trust for the benefit of one or more Beneficiaries.

The Trust Deed sits at the centre of any trust structure, it legally protects everybody’s interests and provides the governing rules abided by and overseen by the Trustees – understand the fundamentals of a trust here.

Whilst trusts themselves are unregulated, in certain jurisdictions professional Trustees must often be licensed to provide such services. For example, professional Trustees in the Isle of Man must hold a Class 5 license under the Financial Services Act 2008 and regulated by the Isle of Man Financial Services Authority; and they must act with due skill, care and diligence when carrying out regulated activities.

As the Settlor usually establishes a trust for a specific purpose, certain trusts can be difficult to change, whereas others may be changed at any time.

Where permitted, changes are often made by the Trustees and/or the Protector in accordance with the Trust Deed. Changes may include adding and removing Beneficiaries, retiring and appointing Trustees, extending or reducing the Trust Period; such changes are ordinarily executed by a Supplementary Deed.

Trusts are considered separate property of the Beneficiary spouse but are subject to dispersal if they contain marital property.

The type of trust, the jurisdiction in which it is established and how the Beneficiaries stand to benefit from the Trust, will decide to which taxes, rates and allowances it will be subject.

Some property may also be excluded, meaning that no inheritance tax is payable.

Before setting up any structure, it is vital to get the appropriate professional advice to ensure that you are aware of any tax liabilities or implications that may arise.