What is a trust and how does it work?
With origins dating back centuries in England and Wales, trusts are a well-established way to manage and pass on money and assets like property, land and investments.
Today, trusts are commonly used for wealth protection and in estate planning to hold family assets in a secure, tax-efficient package.
Our partners, Blevins Franks Trustees Limited, provide a range of trustee and corporate services for UK residents and expatriates. Here they explain a little more about trusts, and how they might benefit you and your family.
How does a trust work?
When establishing a trust, you become the ‘settlor’ and transfer the legal ownership of assets (cash, investments or property) to another person or organisation, known as the ‘trustee’. Those assets are looked after by the trustee until they’re passed on to the ‘beneficiaries’ – usually the settlor and their family, friends and nominated charities. The way this is done is set out in a legal document called a ‘trust deed’ – by law, the trustee must act in the best interests of the beneficiaries.
What are the benefits of trusts?
While the advantages will depend on the country in which the settlor and beneficiaries are resident, trusts offer some general benefits.
Tax and cost efficiency benefits
- Centralise a number of your assets under one potentially tax-efficient roof
- By acting as an alternative to a legal will, trusts can remove the need for expensive, lengthy probate to pass assets to your heir
- Efficient administration of assets and payment of expenses on behalf of beneficiaries
Security benefits
- Trust investments are professionally managed in a highly regulated environment
- Assets are potentially protected from bankruptcy and divorce claims (against you as the settlor, or your beneficiaries) and spendthrift beneficiaries
- In most circumstances, the trustee doesn’t have to follow local succession laws, so assets won’t be divided up according to the ‘forced heirship’ rules in Spain, Portugal, Malta or Cyprus
- As a legally neutral voice in family disagreements, trustees must act in the fairest way possible, without bias, when administering and distributing assets
Flexibility benefits
- Assets are distributed under the guidance of your wishes as the settlor, which you can change efficiently and at minimal cost
- You can cater for increasingly complex family situations and avoid forced heirship laws applying to your estate
Why choose Blevins Franks?
Blevins Franks Trustees Limited is the largest trust company in Malta and has been in operation for over 16 years. They are authorised and regulated by the Malta Financial Services Authority (MFSA) under both the Trusts and Trustees Act and the Retirement Pensions Act.
Through 13 qualified and experienced officers, they offer trust services to UK residents and expatriates in Spain , Portugal, Malta and Cyprus. They currently manage around 1,500 trusts and companies as well as over 200 pension accounts.
There are some good reasons for choosing a trust based in Malta:
- As a highly regulated jurisdiction, both you and your beneficiaries can have peace of mind that your assets are secure and well-protected
- Malta doesn’t tax most income and gains that accrue within a trust, so it’s a highly tax-efficient place in which to hold trust assets
- As a full and stable member of the EU, Malta is subject to EU rules and will be unaffected by Brexit developments
What types of trust do they provide?
Blevins Franks Trustees Limited have the expertise to administer any type of trust. The most commonly used trust is the ‘discretionary trust’ and a version of this known as a ‘pilot trust’.
A discretionary trust enables them, as the trustee, to administer assets in the best interests of the beneficiaries and in the most efficient way, in line with your guidance. If you want to access your assets during your lifetime but would like to take advantage of the estate planning benefits of a trust, a pilot trust may be a suitable option.
For many expatriates, pilot trusts are a good wealth management solution that enables their estate planning to roll across generations.
Is a trust right for you?
Whether a trust structure is suitable for you will ultimately depend on your personal circumstances, aims and objectives. Blevins Franks can outline all your options – not just trusts – and make tailor-made recommendations to help you find the best solution for your savings, pensions, investments and estate planning.