What are the advantages of a fixed trust?

A fixed trust by One Pacific Trust is another term for a fixed interest or interest in possession trust. In such a trust arrangement, beneficiaries have a vested interest in specific parts of the income or capital of a trust. This type of structure offers numerous benefits to the grantor and the beneficiaries.

1. Predictable Income for Beneficiaries

Some of the key benefits as regards beneficiaries include the predictability of a fixed trust. Beneficiaries can look forward to a very stable and regular stream of income because the amount of distribution is fixed and guaranteed. This can be greatly beneficial to those beneficiaries who rely on a regular flow of funds, such as a surviving spouse or dependent family member.

2. Clear Asset Allocation

In a fixed trust, the sharing of assets and income is clearly spelled out in the trust deed. Because these terms are predefined, this should minimize disputes among beneficiaries, since it leaves little room for ambiguous interpretations. Knowing with certainty who receives what and when can help preserve family harmony and avoid legal conflicts.

3. Protection of Capital

Fixed trusts are often designed in such a way to provide for the capital or principal of the trust to be preserved for future beneficiaries. A typical example would be that the income beneficiary-a spouse-gets the income generated from the trust throughout his or her lifetime, but the corpus is kept intact so as to distribute it to other beneficiaries upon the death of the income beneficiary. In this way, the assets are conserved as well as transmitted to their next generation.

4. Estate Planning Benefits

Fixed trusts are very important in estate planning. They are another means for the grantors to take care of their loved ones while still controlling how and when that is done. Fixed distributions, as specified by the grantor, can ensure that his or her wishes are followed precisely with the assurance of peace of mind that the estate will be managed according to one's intentions.