A private trust is created to benefit one or more private individuals or non-charitable entities, as opposed to a charitable trust which has charitable beneficiaries. The distinction between private trusts and charitable trusts, while obvious, is necessary because there are certain requirements and conditions which apply to one but not the other.
The general purpose of a private trust is to manage and preserve property, typically money, for the benefit of one or more persons or entities, such as for the maintenance, education and benefit of children and grandchildren.
Benefits of Trusts
Trust assets and monies are properly invested
The Trustee manages and administers the trust assets independently
Trust funds are utilised for intended Beneficiaries
The terms of distribution are decided by the Settlor (the person who creates and funds the Trust)
For example, an Insurance Trust is recommended for key providers such as parents with young children. A life assurance policy can be assigned absolutely to Pacific Trustees to create an Insurance Trust instantly in favour of the Settlor’s spouse and/or children named as Beneficiaries in the policy. The policy money does not form part of the insured person’s estate and consequently no Grant of Probate or Letter Administration is required in making claim when the insured dies. Furthermore, the money payable under such a policy is protected against creditors, subject to Section 52 of the Insolvency Act 2017 (formerly Bankruptcy Act 1967).