The term "Trust" is widely known and used, however there are often many misunderstandings as to what a Trust actually is. The correct definition of a Trust is an agreement or contract. It is not, as many believe a special type of company. It is purely an agreement -albeit a very special one, between three parties:

1. The Settlor
The Settlor is the transferor of the assets into the Trust. Any kind of asset can be transferred, funds, shares, cars, boats, real estate and even non entities such as patents or rights. Once the assets have been transferred into the Trust this can not be revoked. Once the Settlor has transferred all the assets into the Trust he can legally declare that he does not then own them. This is of special interest in cases of bankruptcy, divorce and inheritance or legal claims. Trusts are one of the most preferred methods employed by US medics to protect their assets in case of malpractice claims being  brought against them.

2. The Trustee
The Trustee is the official manager of the Trust. Officially the Trustee must be independent from the Settlor and has all rights and full control over the actual running of the Trust. Obviously few people would wish to pass that amount of control over their assets to a third party so generally the Trustee will always act unofficially on instruction from the Settlor. It is possible to draft a separate agreement between the Settlor and Trustee ensuring the Settlor retains full control. In order to act as Trustee over any Trust, the Trustee must hold a special license. WSR have the benefit of using the services of a long established and reputable Trustee.

3. The Beneficiary
As the name suggests, the Beneficiary is the person or persons who finally receive the assets from the Trust. The Settlor can be a named Beneficiary. All entitlements to beneficiaries must be set at the commencement of the Trust and can not be revoked or changed. Once the beneficiary has received the assets from the trust he is then liable to declare this and pay due taxation. The Beneficiary can receive regular payments from the trust, for example from the interest or can wait for the expiry of the Trust and receive all assets and interest in full.

Advantages in forming a Trust

The Settlor can transfer any assets he has and legally declare he does not own them

No assets that belong to the Trust can be seized

Potential inheritors can not make claims against the Trust

Trusts are free from taxation

Disadvantages in forming a Trust

Trusts can not engage in business but purely manage and protect the existing assets

Trusts have a maximum duration period of 99 years

The Beneficiaries are liable for taxation upon payout of the assets

Once a Trustee has been selected it is almost impossible to replace him