- Guaranteed payout: A life insurance policy offers a predetermined payout, providing financial security to beneficiaries.
- Tax efficiency: Proceeds from a life insurance policy held in a trust may be free from inheritance tax or other taxes, depending on the jurisdiction.
- Flexibility: Life insurance policies can be structured to meet specific needs, such as providing income for a spouse or education funds for children or paying an inheritance tax bill.
- Premium payments: Policyholders must maintain regular premium payments to keep the policy active, which may be a financial burden.
- Limited investment growth: Life insurance policies typically offer more conservative returns compared to other investment options
If you own a business, transferring your ownership interest into a trust can help protect the business and ensure its continuity for future generations.
- Succession planning: A trust can be structured to facilitate a smooth transition of business ownership to the next generation, preserving the family business legacy.
- Asset protection: Transferring business interests to a trust can protect the business from potential legal or financial issues, safeguarding its value for beneficiaries.
- Tax benefits: In some jurisdictions, transferring business interests to a trust can offer tax advantages, such as minimising estate or inheritance tax.
- Control: Placing your business interest in a trust may result in reduced control over the business, as decisions are made by the trustee(s).
- Valuation and liquidity: Business interests can be challenging to value and may not be as liquid as other assets, potentially affecting beneficiaries’ financial needs.
Collectibles & Tangible Assets
Collectibles, such as art, antiques, or rare coins, and other tangible assets like luxury cars or jewelery, can be included in a trust to preserve their value for future generations.
- Unique value: Collectibles and tangible assets can hold sentimental value and provide a connection to family history.
- Potential appreciation: Some collectibles may appreciate in value over time, offering potential growth for beneficiaries.
- Illiquidity: Collectibles and tangible assets are typically less liquid than financial assets, which may be an issue for beneficiaries requiring immediate access to funds.
- Storage and maintenance: These assets often require secure storage, insurance, and ongoing maintenance, resulting in additional costs.
- Valuation challenges: Accurate valuation of collectibles and tangible assets can be difficult, impacting the equitable distribution of assets among beneficiaries.
Intellectual property, such as patents, trademarks, and copyrights, can be included in a trust to preserve and monetise their value for future generations.
- Income generation: Intellectual property can generate income through licensing, royalties, or sales, providing ongoing financial support for beneficiaries.
- Capital appreciation: The value of intellectual property may increase over time, offering potential growth for future generations.
- Valuation challenges: Intellectual property can be difficult to value accurately, complicating the equitable distribution of assets among beneficiaries.
- Legal complexity: The protection and enforcement of intellectual property rights may require specialised legal expertise and ongoing management, potentially incurring additional costs.
Cash and Cash Equivalents
Including cash and cash equivalents, such as savings accounts, certificates of deposit (CDs), and money market funds, in your trust can provide liquidity and stability for beneficiaries.
- Liquidity: Cash and cash equivalents are easily accessible, providing beneficiaries with immediate access to funds when needed.
- Stability: These assets are generally considered low-risk, offering a safe haven for preserving wealth during market volatility.
- Flexibility: Cash can be used to cover expenses, emergencies, or investment opportunities as they arise.
- Inflation risk: Over time, the purchasing power of cash may be eroded by inflation, reducing the real value of the wealth transferred to future generations.
- Low returns: Cash and cash equivalents typically offer lower returns compared to other investment options, limiting potential growth for beneficiaries.
Incorporating a Diverse Mix of Assets in Your Trust
When selecting assets for your trust, it is essential to strike a balance between growth potential, income generation, and risk management. By incorporating a diverse mix of asset classes, you can create a trust that:
- Provides financial stability and security for your beneficiaries during times of market volatility or economic uncertainty.
- Offers income sources to support your beneficiaries’ short-term and long-term financial needs.
- Maximises the long-term growth potential of your wealth, ensuring its continued benefit to future generations.
- Takes advantage of tax efficiencies and other benefits specific to certain asset classes, depending on your jurisdiction.