It will be no surprise that the majority of trusts, established both onshore and offshore are created for the purpose of saving tax. However, there are many other reasons for establishing trusts, and in this article we look at a few circumstances where a trust might have a role to play in resolving potential problems.

A dilemma which faces many successful entrepreneurs is how to deal with the future of their company once they have made the decision to retire. Do they involve their children in the management of the business? Do they bring in professional managers? Do they sell the business?

If a decision is made to retain the business, perhaps due to fact that the level of profits exceed those available from an investment portfolio, or the company is still felt to have significant growth potential, thought should be given to placing the shares of the company into trust. The advantage of holding the shares in trust is that the ownership of the company will be held by trustees for the benefit of the family rather than by the family direct. Within the trust deed, restrictions on the future sale of the company can be included.

In this way, the trustees will have the responsibility to ensure that the interests of all the beneficiaries are considered and prevent a situation occurring whereby one child decides that it is in their best interests for the shares to be sold, ignoring the interests of the remainder of the family.

Since the introduction of specific legislation in 1990 clients establishing a Guernsey Trust have had the ability to leave their assets to whoever they choose without restriction. It is, however, important for clients to note that whilst the courts of Guernsey will uphold the terms of the trust and ignore any claims from individuals who consider that they have been disinherited, assets held outside of Guernsey may not be subject to Guernsey Law and could be vulnerable to legal action in the jurisdiction in which they are located.

Trusts established offshore may also provide an effective way of protecting assets from the imposition of exchange controls and other forms of government regulation. This may be particularly relevant for people working abroad who wish to place their assets in a politically stable jurisdiction. A trust may also provide some measure of protection against future claims against an individual.

Another circumstance where trusts are often used is when individuals wish to make provision for members of their family who, for one reason or another, are unable to manage their own affairs. These persons may be infant children, elderly relatives or persons suffering mental or physical disabilities.

Modern day trusts have the flexibility to meet the varying demands of today's private clients and can be individually tailored to meet specific needs. Whilst the mitigation of tax may be a prime motive for their establishment, it can be seen that they have many other benefits.

This article provides a general outline on the subject at the time of writing. It is not intended to be exhaustive nor to provide legal advice in relation to any particular situation and should not be acted on or relied upon without taking specific advice.