Business Trusts & Asset Protection

A trust structure is a tool for investors and businesses. The primary advantage of a trust structure is that it provides flexibility. Income can be distributed to the lower income earner, assets can be sheltered and wealth can be passed onto the next generation with minimal fuss and little or no tax.

Trusts come in all shapes and sizes and there is no “one-size-fits-all” so be wary of anyone who says there is.

A trust is basically an agreement or promise. A person or company agrees to hold assets for the benefit of another. The one who holds the assets is called the trustee; those who benefit are beneficiaries.

The trustee has legal control. A person with legal control can buy and sell an asset but will never own or enjoy the benefits of ownership, such as income or usage.

More particularly, asset protection occurs because even though legal title is in the name of Joe Bloggs, Joe is trustee for a trust and therefore doesn’t own the asset – the assets are held in trust for the beneficial owners, hence nothing can be taken from Joe because he doesn’t own it. These are an invaluable tool for tax purposes to protect and maximize assets and minimize tax.

It’s a sad fact that certain industries and professionals are more susceptible to litigation than others. While we recommend asset protection for every business owner, we don’t recommend asset protection for every business.

As far as what type of trust should be used, that depends on your personal situation. The point to note is:

Business assets should be protected in a separate entity, particularly in highly litigable industries.

Let us help you learn more about this rewarding strategy.