For many hundreds of years, Trusts have been used as a means of securing assets or wealth for later distribution to their respective beneficiaries. It has been claimed that Trusts originated at the time of the Crusades when Barons, Knights and the like left to fight in the Holy Land and left their lands and castles in the trust of a third party with instructions on what to do should they not return. Henry VIII is said to have been responsible for committing Trusts to the written word.
Whether the above statements are factually correct or not is of little importance. Of far more importance is the fact that Trust Law around the world is based on English Trust Law and that the majority of the world’s wealth is said to be held in Trusts. How much this is no one knows for sure but it surely demonstrates that there is serious value in Trusts no matter which way you look at them. UK pension schemes are a good example of the use of Trusts in that literally billions of £’s worth of assets are held in trust for the benefit of pensioners, employees, deferred members and so on. These assets are controlled by Trustees who are required to act under general Trust law and the specific Trust Deed relating to whatever fund or assets under their control and to act in the interests of the beneficiaries. To do otherwise would be a serious criminal offence.
One important fact well worth knowing is that a Trust of itself cannot own anything. It is simply an arrangement governed by a Trust Deed laying down the rules under which the Trustees must act, the overriding requirement as stated above being that they act in the best interests of the Beneficiaries under the Trust. It is the Trustees of a Trust who actually take ownership but even then, only on behalf of the Beneficiaries.
In more recent times, Trusts have been used as part of both large and small company structures to aid in the safekeeping of business assets through their continued existence. Where some Trusts are used simply to retain funds or physical assets, there is now an ever increasing trend in effectively gifting the ownership of companies and corporations into Trust for protection purposes and to ensure that the ownership the corporations can be correctly transferred to the owner’s heirs, next of kin or intended successors in the event of their passing.
Overseas Trust and Foundation
When Companies, particularly overseas companies are established for asset protection, the ownership of them is often transferred to Trustees, who will retain control until such time as the Trust is wound up. They can appoint individuals as directors to actually run the company and are able to delegate significant powers to the directors. Where larger or overseas companies are concerned and an overseas Trust is used, a Licenced Trust Company would usually take on the responsibility as Trustee on behalf of the business owner. Although this has become standard practice in many jurisdictions, some business owners require even higher levels of security for the ownership of their companies.
In response to these requirements, many overseas jurisdictions now offer “International Foundations”. Although the basic premise remains the same to that of a Trust, there are a number of benefits (depending on the applicant’s requirements) over the formation of a Trust. Unlike a Trust, a Foundation is a legal entity of itself (just like a company) and can own assets including shares in a company, property, money in bank accounts etc. etc. Instead of Trustees, foundations would typically be controlled by Foundation Council Members who are appointed when the Foundation is created. The Council Members of registered Foundations are bound by law to act in accordance with the Founder’s wishes and to act in the best interests of the beneficiaries. It is worth noting that there is no requirement to name the beneficiaries and a foundation can simply be set up with a purpose, not a named beneficiary. Notwithstanding, the Foundation Council must still act according to Foundation Law of the jurisdiction in which it is created and the Foundation Deed.
In summary, both Trusts and Foundations can offer benefits to both individuals as well as to a range of corporate entities.
Turner Little offer the creation of both Trusts and Foundations alone or in conjunction with the incorporation of UK or Offshore Companies. For further assistance please contact us on 01904 783101.