A family trust is an important element of any estate plan and is important for entrepreneurs and business succession planning. A family trust is built upon a trust document. This document, created by you, the “settlor” of the trust, nominates a trustee who will manage your trust’s assets on behalf of your beneficiaries, according to terms which you outline in that document. There are many types of trust structures, each with its own pros and cons, so it’s important for entrepreneurs to seek counsel before deciding on what type to choose.
Trusts are associated with the very rich, but anybody can use them, so long as you have assets. Broadly, there are two main kinds of trusts: revocable trusts, whose terms can be changed and which can be dissolved at your discretion; and irrevocable trusts, whose terms cannot be changed and which cannot be dissolved.
Before starting a trust, you want to define your goals and reasons for setting up a trust. This will guide you toward the trust type that best meets your business succession planning needs. You will also need to nominate a successor trustee who will take over the management of the trust in the event that you are incapacitated or pass away.
One of the most common reasons that people have for creating a trust is because trusts ensure that your estate does not have to go through probate. This preserves the privacy of your estate and protects your beneficiaries from a long drawn out, expensive and potentially contentious process. Another reason for having a family trust is to reduce the tax burden on your estate.
When you have defined your goals and expectations, you will begin to see things more clearly in terms of what you want your trust to achieve. After that, you need to study the major types of trusts: revocable trusts and irrevocable trusts, as well as the many other trust types, to determine which trust best aligns with your business succession planning goals.
Now what you have to do is gather all your title deeds, and other other deeds or certificates for any assets that you own, including all of your business assets. You will need to fund your trust and this can only be done by changing the ownership of the assets that you plan on leaving to your beneficiaries.
At this point, you need to decide what kind of service you will use to draft your trust document and execute your wishes. For instance, you can use a lawyer, or an estate agent, or an online service like Trust & Will. Setting up a Family Trust has a wonderful resource here that you can use when considering what kind of services you can use.
After this, you need to determine how big your potential estate is. This will help you determine how you can fund your trust. Your title deeds and certificates will give you a picture of what your assets are. This includes financial accounts, pension plans, life insurance, property, stocks, jewelry and other assets.
When you have done all this, the last thing to do for business succession planning is to draft the trust agreement in consultation with your lawyer or some service, and fund your trust by transferring ownership of the assets to your trust.