Reasons for setting up a family trust

• To protect your assets from creditors. This will apply particularly for a business person who is self employed or running a small company;
• To provide for children without those children being able to waste the capital assets or have them subjected to the Property (Relationships) Act 1976 on a marriage break-up
• To protect your assets from a possible claim brought by a de facto partner or spouse, under the Property (Relationships) Act 1976
• Possible safeguards against future Government taxation legislation - eg a return of death duties;
• By keeping assets in a different legal entity thus being a hedge against asset testing for future Government pension or, as at present, for benefits including the rest home subsidy;
• To help avoid claims which may be made against a deceased person’s estate under the Family Protection Act. This may be of particular significance in a second marriage or de facto relationship where there is often a conflict on death between the surviving second partner and the children of the first marriage.
• To make provision for a special needs member of the family.
• To provide an opportunity to create wealth within the family. The Trust continues after the death of the Settlor so that assets can remain without a deceased estatehaving to be wound up or assets distributed.

It is interesting to note from an historical point of view that a tradition of family trusts developed from the wish of wealthy landed gentry to ensure that their estates were not dissipated by their possibly irresponsible children and to secure a device by which those estates were generally to remain farmed by the eldest son.

An elaborate legal structure was set up which kept property in the name of trustees on a long term basis and so that the children only ever received the income from the estate. When the eldest son was of a mature enough age he was then invited to re-establish the trust so that it continued to apply in the same way for future generations.