Investment Trusts
The Term Investment Trust means a form of special purpose Trust where the structure of the Trust differs from that of a normal Family Trust. These types of Trusts are used to differentiate specific business activities from normal business functions or to isolate specific assets for specific purposes
Investment Trusts could typically differ from normal Family Trusts in that the Trust may have a single Corporate Trustee rather than family members directly or may list specific Trusts as beneficiaries rather than family members
Examples of situations when Special Purpose Trusts could hold assets are:
Separation of Business Activities for Tax reasons
Special tax rules may apply to certain sources of income. It may be desirable from a tax perspective to separate out these sources of income from general income. Use of an Investment Trust would give a clear line of separation between the two sources of income. As in any tax planning matters, accountants should be consulted.
Separation of Property for relationship property reasons
An Investment Trust may be used to hold a particular asset thus keeping it protected from being classified as “relationship property”. Using a sole independent Trustee, or not listing individuals as beneficiaries, could provide an extra level of separation from a relationship claim. As we know, relationship property will usually be divided in half if a relationship fails after 3 years.
Risk management for business purposes
Holding a specific asset in a special purpose Investment Trust may be a prudent measure for reducing risk in a business environment. Limited liability Companies do have some protection from creditors but often that protection is removed by the giving of personal guarantees by Company owners or through liability as a director. Placing specific assets into Investment Trusts may separate those assets from assets that are under control of the Company Director and provide the protection that Trusts give in such circumstances.