Trusts date back to the time of the crusades, when wealthy knights fighting abroad transferred their assets into the name of a friend in England, in case they were killed in action, for the benefit of their minor heirs to protect their inheritance. Over time the equitable concept of trusts was recognised and developed by the courts to defend the equitable rights of the beneficiaries.
Today, trusts are used for similar purposes. Many jurisdictions have restrictions on minor heirs inheriting property or “forced heirship rules” and interposing a trust may circumvent these rules and help with succession planning. Forced heirship rules are laws which define who may inherit property and in what share in a particular jurisdiction.
Trusts have also developed an asset protection purpose. Trust ownership may result in the ownership of trust assets being kept private. In addition certain jurisdictions have legislated laws which mean that creditors of a settlor, such as a former spouse, may not attack the assets held in trust unless certain conditions are met.
Trusts can also provide tax advantages (or disadvantages, depending on where the settlor or beneficiaries are tax resident).
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