The Pros & Cons of setting up a Trust

The basic idea of setting up a family trust is to protect assets and funds. There are a few things to consider to determine whether setting up a trust is the right choice for you.

The Pros

There are many advantages to setting up a family trust. It may help to:

Protect selected assets against claims and creditors – for example, to protect a family home from the potential failure of a business venture
Set aside money for special reasons, such as a child’s education fund
Ensure children, not their partners, keep their inheritances
Manage the risk of unwanted claims on your estate after your death

The Cons

Ongoing legal and accounting fees – getting professional advice before setting up a trust is crucial to ensure it is to everyone’s benefit and ongoing management is required to comply with legal obligations
If the trust has a complex structure the time involvement to manage it can be quite considerable
Once you put your assets into a trust, you no longer personally own them. Ownership passes to the appointed trustees, who must act under the terms of the trust deed in the best interests of the beneficiaries
Issues among family members can be expensive to resolve: There have been cases of family members suing the trustees if there is a breach of the trust’s provisions

The bottom line

If a trust it set up for the right reasons and managed well, it can have some great advantages. On the other hand, if this is done without expert advice a trust can cause considerable inconvenience and cost for all parties involved.