UAE TRUSTS: AN IMPORTANT TOOL FOR ASSET PROTECTION
A Trust is an arrangement that is established by a trust deed between three individuals, a settlor who creates the trust and transfers assets to the trustee who manages the trust for a beneficiary who receives the ultimate benefits from the trust. The main types of trusts are namely:
- Discretionary trust begins during the life of the settlor. The trustee has the power to decide a beneficiary or a group of beneficiaries who would receive the benefits from the trust.
- A charitable trust that is only created for social causes like education or health ultimately benefits society as a whole and not just one individual.
- A testamentary trust is created due to instructions from a will, that comes in effect after the settlor’s death.
Trusts are known to be a very powerful & important tool to manage family wealth because of the numerous benefits arising from it.
Simplicity, Ease & Low Cost
The cost of establishing a trust is lower when compared to the cost of establishing a foundation. It entails a less complex procedure and allows the wealth to be flexibly directed towards family members as per the choice of the settlor.
Protection from Creditors
In cases of bankruptcy and insolvency, it also protects the assets from creditors as it is not a legal entity in its own right. It cannot be sued against, unlike companies and foundations.
It also ensures that a family-owned business is carried on within the family and children for an indefinite time. It plays a fundamental role in succession planning and also eases the process of role transition.
Estate Planning/Next Generation Tool
Establishing a trust is the best way to transfer wealth among family members while most importantly maintaining control over the assets.
It is the solution to the problems of ownership faced by the family business and acts as a means of safeguarding the wealth as well as the legacies of such families in the coming future.
Wealth Planning/Tax Saving Vehicle
Trusts are held outside the estate and hence are not subject to probate. Capital gains tax, in some countries, can also be reduced by freezing a proportion of assets under a trust.
Confidentiality and Privacy
The confidentiality benefits of trusts are one of the main reasons why it is one of the most sought-after asset protection vehicles and estate planning tools. Trusts have historically been the most commonly used vehicle to help settlors who are concerned about their own security and also confidentiality and maintaining their privacy. UAE Trusts; DIFC Trusts and ADGM Trusts have strong provisions protecting the confidentiality of information for a trust legally and information is not publically accessible.
In summary, Trusts are very useful vehicles in today’s market, however, to avoid any complexities, it is advisable that you seek advice from seasoned consultants with commensurate years of experience of establishing trusts in the UAE market. It is essential that highly certified trust managers such as those from Wincore Advisory Group will put together an effective wealth protection plan to ensure that you enjoy maximum efficiency while accruing all the benefits that are usually derived as a result of establishing a trust.
Wincore specializes in Tax, Estate, Corporate and Fiduciary matters. We provide pragmatic, flexible and efficient solutions to individual entrepreneurs, startup businesses, foreign and local SMEs, multinationals, wealthy international families, HNWIs and UHNWIs.