How Trusts & Foundations can assist Wealth Preservation

Trusts and foundations can be key to helping individuals and families navigate regulatory scrutiny and shield assets from potential threats. They may also serve as effective tools for long term wealth preservation and succession planning.

What is a trust?

For centuries, trusts have been used to help achieve wealth preservation.

A trust is a legal arrangement where a person (known as the Settlor) transfers assets to a trustee, who manages the assets for the benefit of one or more beneficiaries.

The role of trusts in respect of asset protection

Depending on the specific needs and desires of a settlor, Trusts can be created in a variety of ways. In many cases, they enable assets to pass directly to beneficiaries, bypassing the often lengthy and costly probate process.

They can also act as a financial safety net for any beneficiaries who are not yet ready or able to manage large assets, and some structures can protect specific assets from future issues such as divorce.

In addition, trusts can be designed to support a surviving spouse, with any remaining assets being transferred to other beneficiaries upon the death of the surviving spouse.

The benefits of irrevocable trusts

When assets are placed in an irrevocable trust, they generally cease to be part of the Settlor’s personal assets. Irrevocable trusts can be particularly beneficial to protect against unforeseen adversities such as hostile claims. They can be an effective means of segregating the Settlor’s assets from such claims.

In addition, Jersey law allows settlors to reserve powers or to play a role on the board of a Private Trust Company (PTC) or as a protector of a trust and have some role in directing the way the trust is operated. Placing assets in a trust can offer the Settlor more testamentary flexibility than alternatives such as a will.

What is a foundation?

While trusts are prevalent in common law jurisdictions, foundations have become increasingly popular in civil law jurisdictions. They are particularly appealing to high net worth individuals seeking a structured approach to manage charitable activities.

Like trusts, foundations separate legal ownership from beneficial interest, protecting assets from personal liabilities. The difference is that a foundation is an independent legal entity with its own legal personality and, in particular, offers an attractive solution for philanthropic endeavours.

One advantage of creating a foundation is that it can live on in perpetuity. For some trusts this is not always possible. Foundations also offer a high level of discretion – which is particularly beneficial for individuals valuing privacy.

Like a trust, a foundation acts as a secure repository for assets, providing protection from creditors, lawsuits, and other financial risks. They also facilitate smooth succession planning, ensuring wealth is transferred to future generations while maintaining control over asset use.

A key feature of foundations is that they do not have ‘owners’ in the traditional sense, which can provide a useful planning tool in certain situations.

Where should you establish a trust or foundation?

Structures such as trusts and foundations are available in a number of locations around the world.

Subject to independent taxation advice, offshore jurisdictions such as Jersey can offer a combination of tax and non-tax planning opportunities including asset protection, succession planning and the holding and preservation of the assets.

How ZEDRA can help

Wealth preservation is more important than ever within an everchanging economic landscape. With their unique benefits and flexibility, trusts and foundations offer strategic solutions for asset protection, wealth preservation, and intergenerational wealth transfer.

Our team of experts in key locations worldwide can guide you through the various trust and foundation structures available and help you create the most appropriate structure for your circumstances.

Contact Katrina Drewer or Jamey Dwyer to find out more.