Our Approach
Trusts and foundations are essential tools in wealth management that offer numerous advantages for individuals and families. These benefits include addressing forced heirship concerns, optimizing tax planning, avoiding prolonged probate processes, providing asset protection, and supporting charitable giving.
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What is a trust?
Trusts are considered to be the ultimate tool for high-net-worth individuals in estate planning.
A trust is a legal arrangement where the owner of assets transfers their legal ownership to individuals or a corporation, often for the benefit of family, friends, or charitable organizations. Unlike other financial instruments, a trust is an agreement between two parties and does not require registration to be effective.
Trusts serve as a versatile tool for managing and distributing assets. They allow you to safeguard your wealth while benefiting yourself, your loved ones, and charitable causes simultaneously. Whether it’s real estate, stocks, or other nonessential assets, trusts provide significant financial advantages, especially for those with philanthropic goals.
What are the tax benefits of a trust?
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Reduction in Tax Burden: Once assets are transferred to a trust, they exit the settlor's patrimony and become the beneficiaries' responsibility, requiring inclusion in their tax returns.
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Reduction in Taxes Payable at Death: An estate freeze locks in the value of appreciating assets. During the freeze, a trust owns participating shares, so any value growth occurs within the trust is not taxable upon the owner’s death. Taxes apply only upon a sale or deemed disposition of the shares.
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Wealth Transfer and Protection: A trust allows you to control how and when beneficiaries receive funds. One benefit is that a trust can prevent children from frittering away their inheritances.
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Asset Protection: A family trust safeguards assets for beneficiaries, protecting them from creditors. The trust assets cannot be seized following a lawsuit or personal bankruptcy.
What is a foundation?
Foundations are considered a hybrid between a trust and a company. A foundation is a body corporate without shareholders and is governed by a council in accordance with the foundation’s constitutional documents. A foundation needs to be registered for it to exist.
A foundation, also known as a charity foundation, can be categorized as a nonprofit organization or charitable trust that generally funds and supports other charitable organizations through grants. However, a foundation can still be directly engaged in charitable activities.
Foundations are fantastic alternatives to a common-law trust, especially if one is familiar with civil law. They can be great options for private wealth, protecting assets, and or the purpose of charity; in a few jurisdictions, they can be used for commercial purposes.
What are the tax benefits of a foundation?
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Tax-Deductible Donations: Donors may make tax-deductible donations to their own family foundation and still, as foundation trustees, remain in control of the investment and management of the funds as well the final charitable disposition of the gifts.
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Sheltered Income: Foundation investment income, held by the foundation's trustees, is exempt from taxation (with the exception of the 1-2% excise tax described below).
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Capital Gains Tax Benefits. First, no capital gain is realized when appreciated property is donated to a foundation. Second, donors may claim a charitable deduction for the full market value of appreciated stock held in publicly traded companies.
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Estate Tax Reduction. Assets transferred to family foundations are generally not subject to estate taxes. This may provide triple tax savings when combined with the benefits above.