What is a trust?

The main tool of the offshore financial industry is the trust, a legal instrument which has its roots in Middle Ages, when knights about to join the Crusades in the Middle East would transfer their possessions and land to the safekeeping of a trustee while they were away. The trustee would be given legal title to the knight’s land and possession and have carte blanche to manage them in his absence, provided that any decisions they took were for the knight’s (the settlor in legal parlance) benefit rather than their own.

In modern times, the range and use of trusts have become more sophisticated but the principle remains the same. Trustees are now commonly companies set up specifically for the purpose and the beneficiary of a trust can be anybody the settlor chooses, very often family members or charities. The trustee will be the legal owner of any assets transferred to the trust and must look after those assets according to the terms of the trust deed drawn up at the outset as determined by the settlor or a deceased settlor’s will.

A very common use for trusts is to ensure that children who are left or given large sums of money do not have full access to it before they are mature enough to use it wisely. Trusts can also be set up to ensure that the donor retains more say in how their assets can be used after their death or to prevent a family business from becoming fragmented if its legal ownership is split between too many beneficiaries. Almost any type of assets – property, bank deposits or shares – can be held in a trust.

Trusts can also be used for tax planning purposes, for asset protection (by distancing assets from their owner in the event of divorce or company failure) and for those seeking some privacy for their families when they die – the contents of a will are on public record, but the contents of a trust are not.

Find a lawyer >>

Use our free and confidential Matching Service to compare law firms and prices