A trust is a legal arrangement in which a person (settlor) transfers assets to another person or entity (the trustee) to hold for the benefit of others (the beneficiaries).
Trusts are a creation of the English (Common) Law system. They offer great flexibility and can be a very useful tool in estate planning and wealth management.
We are often asked to advise on issues of Trust law and on the implementation of Trust arrangements.
What is a Trust and When is it used?
A trust is a legal arrangement in which a person transfers assets to another person or entity (the trustee) to hold for the benefit of others (the beneficiaries).
The trust document outlines the terms of the arrangement and sets out the rights and responsibilities of the parties involved. The trustee is responsible for managing the assets in the trust and distributing them to the beneficiaries according to the terms of the trust document.
Estate Planning & Wealth Management
Trusts can be used for a variety of purposes, and they are often an important part of estate planning. By placing assets in a trust, individuals can ensure that their assets are distributed according to their wishes after they die. This can be particularly important if the individual has specific wishes regarding the use of their assets or if they have concerns about the ability of their beneficiaries to manage their inheritance.
Trusts can also be used for tax planning purposes, protect and allow for the administration of assets, and provide ongoing support for family members or other beneficiaries.
For example, a trust might be established to provide for the ongoing financial needs of a disabled or incapacitated family member.
Types of Trusts
Trusts can be established during a person’s lifetime or after their death. Trusts can be either revocable or irrevocable.
Trusts can also be used for charitable purposes whilst Cyprus law, following the common law, also recognised resulting, constructive and implied trusts.
The type of trust used depends on the specific goals of the Settlor.
Cyprus International Trusts
Additionally, Cyprus offers the option of the Cyprus International Trust, which was especially designed to allow greater flexibility in asset management and protection.
Unlike an Express Cyprus trust, there are no limitations on a CIT’s duration, unless the trust deed explicitly provides otherwise. The settlor of such a trust must not be a resident of Cyprus, the beneficiary must be a non-resident of Cyprus and at least one of the trustees is at all times a permanent resident of the country.
Formation
Setting up a trust can be a complex process, and it is important to seek professional advice.
The trustee has a fiduciary duty to act in the best interests of the beneficiaries but also great discretion in the administration of the Trust.
It is of paramount importance to choose a trustee who is trustworthy and competent.
Overall, trusts are a flexible tool that can be customized to meet a variety of personal and financial goals, and they are often used by individuals, families, and businesses to manage and protect their assets.
Wish to find out more? Contact our team at info@paraschou.com.cy.