Trust and Company Services FAQ's
What is a trust?
A trust is a collection of assets held for a specific group of people or purposes. They are a useful way of transferring assets to chosen heirs and protecting wealth for future generations.
What can a trust be used for?
There is a wide range of uses for trusts, including:
- estate control and planning
- pensions
- charities
- employee share schemes.
What is a Settlor?
The Settlor creates the trust to look after their assets until a specified time, when it can be accessed by the beneficiaries.
The settlor hands over control of the assets in the trust, so it's vital to establish the advantages and disadvantages before setting it up.
These are set out in the Trust Document which the trustee must legally adhere to.
What is the Trustee's role?
A trustee manages the trust on behalf of the settlor. The settlor appoints the trustee, or number of trustees, who they think will get the best return on the investments held in the trust.
The trustee must hold the trust assets separate from their own. They have to keep records of what they do with the trust's assets.
Who are the beneficiaries?
The beneficiaries are those who can use the trust. They are usually named in a written document called the trust deed.
Can the settlor be a beneficiary?
Yes, as long as they are named in the trust document.
What is a Protector?
A protector can be appointed by the settlor as an additional source of advice for the trustee on how to manage the trust.
What assets can be held in a trust?
Trusts are very flexible and may contain a wide variety of assets which are not expected to fall in value. These can include:
- cash
- shares
- property
- works of art
- vintage cars
- livestock
- businesses
- other personal items.
What is the Trust Deed?
The trust deed is a permanent document which lays out the rules of the trust, names the beneficiaries and details the trustee's powers and duties.
It cannot be changed once established, so the settlor must have very clear objectives for what they want the trust to achieve.
What is a Letter of Wishes?
The Letter of Wishes is given to the trustee by the settlor as further guidance on what they would like to gain from the trust.
It is a private document and, unlike the trust deed, it can be updated if circumstances change.
Which countries recognise trusts?
Trusts are popular in countries which base their legal system on the common law Anglo Saxon model, such as the UK and the USA.
Countries which use the civil law system do not recognise the concept of a trust, but instead prefer foundations
Where should I establish my trust?
To make the most of a trust, it can be established by a non-resident in a jurisdiction which has a favourable tax system, along with a stable political history and a well-regulated, healthy economy.
Among the most popular offshore jurisdictions are:
- Bahamas
- Bermuda
- British Virgin Islands
- Cayman Islands
- Cyprus
- Gibraltar
- Guernsey
- Jersey
- Isle of Man
- Malta.
Why does it matter where the trustees are based?
Professional trustees must be located in a jurisdiction that fully recognises trusts by law and where trustees are licensed and regulated by an independent, competent authority. it is important that a trust's location does not affect bankers or other advisers so they can deal effectively with trust assets.
What do I need to consider when I set up a trust?
It is important to think about the beneficiary's needs so that they benefit fully from the trust. For example, you might wish to give a child a sum on their 18th birthday and their 21st birthday, rather than all at once.
When you have decided the best time to do so, you need to work out an investment policy and begin to set it up. STM Life's experienced professional advisors can advise you on all of the above, to make sure you get the best from your trust.
What happens when the trust comes to an end?
At the time appointed in the trust deed for the trust to end, the beneficiaries receive the assets in accordance with the settlor's wishes.
What are the advantages of a trust?
Trusts can protect assets and help with tax planning.
The main reasons for having a trust include:
- flexibility to include a wide range of assets
- privacy - trusts do not normally need to be registered, maintaining confidentiality for the settlor and their beneficiaries
- guaranteeing that the beneficiary will receive the assets as intended, even after the settlor's death
- succession planning ñ a trust can be used instead of a will
- tax planning ñ rules are complex and it's important to take advice, but settlors and beneficiaries may be able to take profits from the trust without declaring them, in certain circumstances
- charitable donations
- protecting assets for beneficiaries who are currently unable to use them properly, such as minors
- safeguarding assets from political and economic instability.
What types of trust are available?
There is a large number of trusts available, allowing settlors to choose the one that suits them best. At STM Fidecs, we offer expert advice on which trust best suits your needs.
Some of the most common types include:
- Fixed trust: the settlor decides what proportion of the assets each of the beneficiaries will receive and when. The trustee may decide on the best investment policy but has no choice over who receives benefit or when it must be paid
- Discretionary trust: the trustee decides which of the beneficiaries receives trust assets, and when
- Charitable trust: many charities are established as trusts, managed by a committee of trustees responsible for allocating the trust's assets
- Commercial: some mutual funds are organised as unit trusts, rather than corporate entities, or may be formed as holding vehicles for specific transactions.
- Employee-related: trusts can be a useful way of providing staff benefits such as pensions.
What is the advantage of a private trust company?
Some clients benefit from the incorporation of a separate company to act as trustee of the family trusts. A private trust company allows you to involve the whole family as directors of the trustee company. It also gives access to the professional trustee's administrative capability, yet freedom from policy constraints. The regulatory framework is different from that applied to a professional trustee, too.
Why should I use STM to look after my trust?
STM is a publicly-quoted company, listed on the AIM market of the London Stock Exchange. The major shareholders of the company are different from the people who actually run the day-to-day business so we do not have the owner-manager risks which concern some clients.
Our staff are all professionally-trained and highly-experienced. In STM Trust Companies, our senior staff are qualified accountants, lawyers and/or trust practitioners.
In addition, we have wide-ranging controls and procedures that govern the administration of trust assets. For example, everything we do requires two people to review (the four-eyes concept). All of a trust's assets are registered in the name of an STM company whose sole purpose is to act as professional trustee and hold assets in an entirely fiduciary capacity for third parties. That company has no assets other than those of the trusts for which it acts as trustee.
To safeguard this by obtaining written confirmation from each bank where we hold accounts for trusts that those monies do not belong to STM, nor can they be accessed should STM ever enter administration or liquidation. STM carries professional indemnity/fidelity insurance well in excess of regulatory requirements. In the worst-case scenario, legal action can be taken to recover the assets in all the jurisdictions where we act as trustee, as each legally recognises trusts and trustees' relationships.
STM Fidecs Management Limited is licensed to carry on financial services business by the Gibraltar Financial Service Commission. Licence N0. FSC00147B
For details of other STM Group entities regulated and registered by the Gibraltar Financial Services Commission go to: Professional trustees, Company management
