When you set up a private company you create a legal entity between you and the rest of the world. You will most likely be a shareholder and director in that company and provided that you comply with your obligations as a director, will not be liable as an individual for the activities of the company. If the company is simply going to act as trustee of a trust, then it should not be used as a trading entity and will then have minimal reporting requirements each year. Essentially a statement to say that there has been no money through the company, its not trading and therefore is solvent and able to continue to exist.
As trustee, the company becomes the public face of the trust and the fact of the existence of the trust does not need to be publicly known. A trust is one of the most private structures that you can set up. Banks and finance companies will require disclosure of the full legal structure you are using and will know the relationships, but the public won’t. A great example is a corporate trustee purchasing a property on behalf of a trust. The registered title for the property will show that the company is the owner. Anyone suing the company won’t get very far because there is no money or property in the company, it’s in the trust.
Different structures have different benefits
When property is held in a trust it is hard to get at. Trusts can be set up to provide the beneficiaries (the people ultimately entitled to the benefit of the trust property) with income from or distribution of the trust assets either at the discretion of the trustee or upon fixed events. Anyone wanting to get something from a beneficiary cannot access the trust property as long as it remains in the trust.
Please note that the Courts may have powers in separations and family breakups which may enable the Court to make orders accessing trust property regardless of whether or not it has been distributed. There are also circumstances where the Courts can declare that a trust exists or that in the circumstances an expectation of distribution from the trust has occurred, enabling access to the trust property.
If you are prepared to spend the money there are apparently ways to make it next to impossible for others to get at your assets. It does depend on the expertise of your advisors and how accessible you want things to be. Also consider what would happen to it all if you died tomorrow and how you would be able to pass it on to a charity or loved one.
Is there more you'd like to know, or a personal experience you'd like to share?
We already have a family Trust established which at this point owns no assests. After reading your post I am wondering if establishing a company as our training entity which then becomes the trustee would also allow us to use income from the company' activities to buy assests for the trust. Does that sounds accurate or not?
ReplyDeleteYou should have a chat with your accountant. It depends upon why you set up the trust and what the terms of the trust are. It could also depend upon the nature of the assets that you want to buy for the trust.
ReplyDeleteAlso, what you are doing with your business. If you have a profitable business set up as a company it can make distributions to the shareholders from the profits. If the trust held shares in the business then the company could distribute some of the profits to the trust and the trust could acquire assets with those funds.
If you are establishing a training entity, you probably want to have all of the intellectual property necessary for the continuation of the business in a trust, and the trust licence the use of those assets to the business. The business can then pay a licence fee to the trust and if anyone took court action against the business, they wouldn't be able to take away your continued use of the assets.
It is a fairly involved area and you will need to think about what you want to achieve in terms of distributing profits and asset protection before you seek further advice.