This week, Joanne Whelan, a partner with Deloitte in
Ireland, discusses the use of trusts in succession
For years in Ireland and elsewhere, the use of trusts as an
asset-holding mechanism fell out of favour due to changes in tax
regimes, and of course, it is still the case that the relevant
jurisdiction's tax rules must be considered before any decision
to set up a trust is made. However, as the global economy continues
to recover and the value of family enterprises continues to grow, I
have found that more and more of our clients are seeking to utilise
trust structures as a means of collectively holding family
Historically, some of my clients' concerns have tended to
relate to effective tax planning and ensuring any value in the
family enterprise passes to the next generation at as low a tax
cost as possible. However, increasingly the issues of concern have
centred around asset protection in the case of marital breakdown,
insolvency or where family members may not have the requisite
commercial acumen to preserve and grow wealth. Also, some of my
clients are concerned with how best to successfully transition
wealth to the next generation without creating an unnecessary
burden or indeed having a negative impact on individual family
members. In such scenarios, a trust can provide a useful mechanism
for the wider family to benefit without many of the risks of
Whether for business or investment assets, trust structures can,
in some instances, make good commercial sense. Succession is
increasingly seen as a business issue and holding business assets
through a trust structure can provide continuity of ownership that
is often crucial to the stability of the business.
They can also protect against control being diluted where, for
example, the number of family members increases with each
generation. By linking the powers of the trustees to the governance
structure of the business, the trust effectively becomes a tool
which can control where the value from the enterprise flows.
Managing wealth centrally through a trust structure can ensure
economies of scale can be maintained and greater investment
potential is realised.
Trusts can also help to protect against the dilution of family
asset values arising on life events such as marital breakdown or
Where the level of wealth is such as to become a burden for the
holder, a trust can put distance between the assets and the
ultimate beneficiaries, creating a level of privacy and security
that cannot be achieved by individual ownership, particularly in
this age of transparency.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Sharia’a compliant trusts have seen a recent increase in popularity, evidenced by the creation of trusts laws in both Dubai and Bahrain in 2007, although offshore jurisdictions such as Guernsey continue to be a popular choice for creating and administering Sharia’a compliant trusts.
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