Trusts can provide opportunities for families to plan the successful transfer of assets to generations with the benefit of control and tax efficiency.
Types of Trusts
There are various forms of trusts available:
• Bare trusts, which can be most tax efficient particularly combined with other structures to maintain control.
• Life interest trusts, which can protect assets for the next generation yet provide for the surviving spouse to benefit accounting for Succession Act rights.
• Discretionary trusts, which are used in cases where young children could otherwise inherit and for asset protection purposes.
Combining trusts with other structures
Where assets are invested in partnerships, co-ownerships or companies, control can be maintained through the use of weighted voting in the hands of trustees yet this weighting should not affect the value of the asset accumulating in each beneficiary’s hands.
Tax Implications
Depending on the type of trust adopted, different tax considerations apply. Stamp Duty, Capital Gains Tax and Capital Acquisitions Tax can arise on the creation of a trust and therefore careful selection of the assets to put into the trust is important to minimise the tax impact.
On an ongoing basis, the taxes that arise in trusts may appear to be higher than what would arise in the hands of individuals however, with sensible planning, the taxes can in fact be minimised or at least be kept to the same level as would have arisen in the hands of the individual, yet the protection of the trust ensures the income, gain and the asset itself can be protected from generation to generation.
What Next?
Consider the type of assets that are available and most suitable for a trust and consider the level of control desired both during and beyond the current owner’s lifetime. The most appropriate trust can then be tailored for these purposes.
© 2009 Aileen Keogan Solicitor and Tax Consultant
