Frequently Asked Questions
A list of the most frequently asked questions by persons considering setting up a Trust is set out below.
1. What is a Settlor?
A Settlor is the person or persons who establish or set up the Trust.
2. Can the Settlor also be a Beneficiary?
Yes it is possible and indeed common for the Settlor or Settlors to also be Beneficiaries of the Trust.
3. What assets can be placed in the Trust?
Almost any type of asset that can be owned individually can also be owned by a Trust structure. In some cases certain assets such as real estate or yachts may need to be owned through a Company, which in turn is owned by the Trust.
4. What type of Trust do I need?
This will depend on your individual circumstances and will be determined after taking suitable legal and tax advice. In most cases, however, the Discretionary Trust is the most widely used and flexible Trust available.
5. What is a Discretionary Trust?
A Discretionary Trust is a wide ranging and flexible document which can hold most types of assets. It gives wide ranging administration powers to the Trustee, which enables flexibility to meet the needs of the Beneficiaries.
6. Can I keep control of the Trust assets after setting up the Trust?
Once assets have been placed into a Trust, they are under the administrative control of the Trustee and the Settlor has no legal ownership or control of the assets.
7. How can I influence what happens in the Trust?
At the time of establishment of the Trust, the Settlor will indicate to the Trustee what the purpose of establishing the Trust is and who are intended to be the Beneficiaries. This will be recorded by the Trustee who will have regard to it in administering the Trust. In addition, the Settlor is invited to submit a letter or memorandum of wishes from time to time which may record any of the Settlor’s ongoing wishes for the administration of the Trust. Whilst this is not a legally binding document, the Trustee will naturally have regard to it in the consideration of its Trustee powers and in the exercise of its discretion under the terms of the Trust Deed.
8. Who will be the Trustee?
The Trustees will usually be a Corporation licensed to provide Fiduciary and Trust services, such as FNBIT.
9. Why is the Trustee a Corporation?
A Corporation, which is licensed in Guernsey, provides financial strength, continuity and the security that the Trust is being administered by a professional and competent institution which has proper checks and balances and is audited by an independent auditor.
10. Can anyone be a Settlor?
Yes, anybody who is over the age of 18 so long as they are not an undischarged bankrupt may be a Settlor. Anybody who is an undischarged bankrupt may not be a Settlor.
11. Can a Trust help my personal tax position?
In many cases, a Trust can be used to improve a personal or family tax situation. This will, however, depend upon the individual circumstances of the Settlor and Beneficiaries and it is important that legal and tax advice is taken prior to the establishment of a Trust to ensure that best advantage is taken of any tax planning opportunities.
12. Will I be kept informed of any activity in the Trust?
Yes, the Trustee will account to the Beneficiaries on a regular basis usually quarterly or six monthly, as to the asset value of the Trust. Under Guernsey’s Trust Law, a Settlor may legally reserve some powers under the Trust, which may allow the Trustee to report certain aspects of the Trust administration to them. They will also wish to meet the Beneficiaries on a regular basis, usually annually to discuss any matters of interest in the administration of the Trust.
13. What happens after I die?
The Trustee will continue to administer the Trust in the best interests of the Beneficiaries. In doing so, they will consider the terms of the Trust and any discussions held with the Settlor before their death as well as any wishes left by the Settlor to indicate how they envisaged the Trust to be administered. The Trustee will, however, consider the ongoing needs of all Beneficiaries prior to the exercise of its discretion.
14. What happens if I change my mind or the family circumstances change?
During their lifetime, a Settlor can indicate to a Trustee either during a meeting or through a letter to the Trustees any change in the family circumstances that the Trustee would need to consider when administering the Trust. Such changes may take the form of providing additional benefit for a child who has special needs and requires greater benefit from the Trust or perhaps that the Trust be terminated if ongoing tax or legal advice indicates that it would be in the interest of the Beneficiaries.
15. What is the legal position?
FNBIT is regulated by the Guernsey Financial Services Commission and is subject to Guernsey Trust Law and Courts. A Trust can protect the Settlor’s assets from “third party” creditors as the assets are owned by the Trustee and not the Settlor or Beneficiaries. This may be challenged if the Trust was created by the Settlor with the intention of avoiding known creditors. Only Beneficiaries can benefit from the assets of the Trust.