A trust is an effective property management and distribution tool. Usually the settlor signs a trust deed in accordance with the law and transfers the assets to the name of the trustee. The trustee holds and distributes the trust assets according to the interests of the beneficiaries. The trustee can be a natural person or a trust company. There are two main categories of trusts: fixed trusts and discretionary trusts.
Type of trust
fixed trust
In a fixed trust, the settlor clearly stipulates in the trust deed the interest in the income and/or assets of each beneficiary in the trust assets. This means that the trustee must distribute the trust assets to the beneficiaries in a fixed proportion or amount according to the provisions of the trust deed.
discretionary trust
In a discretionary trust, the trustee has the power to determine the share of income or assets available to each beneficiary. This type of trust provides greater flexibility, allowing the trustee to make distributions based on the actual needs and circumstances of the beneficiaries. In practice, if a trust company is appointed as the trustee, the trust company will prepare a memorandum of wishes to record the settlor's distribution wishes after the discretionary trust is established.
beneficiary
The beneficiaries of a trust can be anyone, including family members, employees, friends, charitable organizations, and even pets. This makes the trust a flexible property distribution vehicle that can be personalized according to the settlor’s wishes.
tax and registration
The trust deed itself does not need to pay stamp duty, but the documents that actually transfer the asset rights (such as property deeds, share transfer letters, etc.) need to pay stamp duty in accordance with the law. Likewise, the trust deed itself does not need to be registered, but if it involves an arrangement involving an interest in land, it must be registered with the Land Registry.
Trusts vs. Wills
Both trusts and wills can be used as methods of distributing property, but there are significant differences. The beneficiaries of the will must wait until the Grant of Probate is issued by the Probate Division of the Supreme Court before the estate can be legally dealt with and the estate information becomes a public record. In contrast, the operation of a trust is not affected by the settlor's illness or death, the beneficiaries are not bound by the asset freeze period, and the trustee has a duty of confidentiality regarding the settlor's asset arrangements.
Conclusion
As a vehicle for property management and distribution, trusts offer flexibility and confidentiality. Whether it is a fixed trust or a discretionary trust, it can provide ongoing property security for the beneficiaries according to the wishes of the settlor. Choosing the right trustee and type of trust is critical to achieving your wealth management and inheritance goals.
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