Are family protection trusts a good idea?

Family protection trusts are just some of the available options for those who want to ensure that their assets are firmly protected and their heirs' financial security is guaranteed. These trusts protect family wealth from perceived or real threats from creditors, lawsuits, and divorce settlements. They also function as valuable estate planning tools in that they avoid the long and costly probate process and allow a very orderly transfer of property to the beneficiaries. Also, family protection trusts add a cloak of privacy in that trust agreements are not of public record, whereas wills might invite undesirable attention.

Whatever benefits family protection trusts afford with regard to protecting the assets of a family are often reinforced in certain jurisdictions and, if properly constituted for specific types of trusts, by substantial tax benefits. The family protection trust allows a great deal of control by providing certain guidelines when and how the assets are distributed. This would be particularly helpful if you want to make sure the assets are managed responsibly when the beneficiaries are minors or inexperienced in handling large amounts of money. However, it needs to be weighed that these trusts tend to be quite costly to set up and maintain, with legal fees and ongoing administrative expenses running rather high. Moreover, they do require careful legal structuring to ensure they actually meet your financial and estate-planning needs. With irrevocable trusts, for example, once the assets have been placed in the trust, you may even lose the right to recover them or make changes to their ownership.

In all, the family protection trust provides a relatively good benefit in asset protection, control, and tax benefits. However, it is very important to carefully consider the complexities and costs involved. If one has a high net worth or complicated family relationships, a family protection trust would be a prudent investment. Whatever the case may be, it is necessary to consult either a legal or financial expert to see if this kind of trust is suitable for your needs and long-term goals. At One Pacific Trust, our vision is to be the leading provider of trust services.