Trusts

We have all heard of trusts and someone has probably referred to it as being a “strange”, “complicated”, or even illegal or fraudulent fiduciary arrangement. Basically, an instrument to stay away from.

Families have been using trusts to preserve and manage their wealth for the benefit of their heirs for centuries. Today, trusts play a significant role in most common law systems throughout the world. 

Why?

The reason is simple: a trust is one of the most versatile and effective tools that can be used in numerous situations to protect the interests of beneficiaries who otherwise would not be adequately protected.

Let’s try to understand how a trust works. The settlor is the person who sets up the trust by transferring the ownership of one or more assets (of any kind) to a fiduciary (trustee), who manages them for one or more beneficiaries or for the achievement of a certain purpose, according to the rules laid down by the settlor. The main effect of the trust is segregation: the assets transferred into the trust are tied to carrying out the plan, they cannot be attacked by creditors of the settlor and trustee, and all events in the settlor’s life do not affect the trust assets.

The trust is therefore an “open structure”, a “container” that can be filled with rules and according to the desired objectives, in compliance with the mandatory legal regulations. It is therefore forbidden to use it to defraud creditors, as well as tax authorities, or to evade the rules protecting inheritance rights, first and foremost of the spouse and children.  

Thus having cleared the field of a distorted use of the instrument, a trust can be effectively used for a number of purposes, including: to manage the generational transition of a company, to protect personal assets and to effectively manage tax liabilities, to protect and support vulnerable people and children; in family law, to regulate agreements between spouses at the time of separation or divorce, to pursue purposes of guarantee, also as part of business transactions or insolvency proceedings and various other situations.