We have all heard people use the word Trusts and describe other people as benefitting from a Trust, but what is a Trust.

A Trust is like a company but without a company structure. It is made up of people called Trustees and people called Beneficiaries.
The Trustees manage the Trust, which can be made up of money, property, shares, livestock or just about anything. They manage the Trust for the Beneficiaries, who do not have any active role in the trust.

Why create a trust?

Trusts benefit from particular tax status and with property prices so low and the general economy depressed some people consider it an ideal time to move their wealth onto the next generation. This coupled with low stamp duty rates and reduced thresholds for capital acquisitions tax mean that for some people it makes sense to move their wealth on.

Are trusts for everyone?

No, trusts will only make sense in certain situations. There maybe some residual debt issues or issues with financial institutions that would make it attractive to move wealth on. In order for a trust to become economically viable there would need to be assets valued in excess of probably €750,000.00.

Case study on a trust

Paddy and Mary sold off some agricultural land in 2007 and received 5 million euros. They invested some in Bank shares and in commercial property. Some of their investments have disappeared and others are barely ticking over. They are at a point where they want to ensure that their three children are provided for in the most tax efficient manner possible. They have some potential debt issues arising from their failed investments.

Paddy and Mary established a Trust for their three Children. They have appointed their Solicitor and Accountant as the trustees with Paddy’s younger brother Tom. They have transferred a commercial building with a good tenant to the Trust and moved some of their well performing shares into the Trust. Their youngest daughter is not yet 21 and therefore the 6% tax will not apply until she reaches 21. The total value of the assets transferred to the Trust were in the region of €1.1 million and therefore well above the €750,000 threshold. Paddy and Mary avoided triggering a tax liability of €116,000 when they passed on the property and investments to their children in the Trust.