Tuesday, March 17, 2009

Save tax by using a family discretionary trust

There are several advantages to setting up a family discretionary trust from tax, legal and personal perspectives. For one, owners-managers can achieve a key objective: Protecting personal assets from potential recourse by creditors.
What is a family discretionary trust?
A family discretionary trust is an inter vivos trust created by and for the members of the same family. The inter vivos trust is a legal vehicle created through a contract (the trust deed) in which a person (the settlor) transfers assets to one or more persons (the trustees) to control those assets for the benefit of other persons (the beneficiaries). Settlors may transfer a variety of assets into the trust, including investment portfolios, shares from a family company, rental properties, a principal residence, etc. Then, according to the level of discretion described in the trust deed, the trustee may allocate trust revenues or capital to one or more of the beneficiaries. Beneficiaries might include the settlor’s spouse, children or grandchildren, or, subject to certain tax rules, the settlor himself. Setting up a family discretionary trust provides many advantages. To make sure that such a strategy meets all your objectives, it’s wise to consult experienced tax and legal advisors. For any questions, please do not hesitate to contact me.

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