What do you think about when you hear the word ‘Trust’? Maybe you think about a relationship you once had that ended badly or if you are cheeky enough, a type of male contraceptive. However, the word Trust also has a legal definition which means a legal entity created by one party but intended to financially benefit a specific person, company or community.
Trusts are essential when you are trying to create a charity, build a payments service provider, form an organization cost-effectively or secure your children’s future through a family trust. There are two broad categories of Trusts; Simple Trusts and Incorporated Trusts.
A Simple Trust is a simple entity created when two or more persons, known as Trustees, are appointed to hold certain funds or property for the benefit of a third party, known as the Beneficiary. On the other hand, an incorporated trust is a simple trust that has gone through additional steps to make it a body corporate which means that it can own property and sue or be sued.
When do you need a Trust?
- When getting a PSP Licence
If you are in payments and want to get a licence as a Payments Service Provider, you will be required to have a registered Trust in place. Once you have the registered Trust Deed you will have to get a bank account to hold the funds, including the authorised minimum capital, in trust for the benefit of your users.
2. When Forming an Organization in a Cost-Effective Way
One of the easiest ways to form a non-profit organization is by creating a Trust. A Trust allows you to have a registered entity that can receive donations and funding while avoiding the hassle and expenses of registering an NGO.
3. When Forming a Charitable Organization
It is said that good deeds are the only vessels that contain truth. Offering charity is one of the things that can offer us fulfilment in life. However, many people with such good intentions wonder how they can structure their benevolent activities. A Trust is the simplest way for a group of well-wishers to come together and develop a structured way of helping their community for years to come.
4. When Protecting your Children’s Future
One of the most efficient ways to ensure you have a financial legacy and your wealth gets to your children is through establishing a Family Trust for them. In such a situation, you appoint a Trustee to hold some designated funds for the benefit of your children after you have died. This fund can be used by your children to start businesses, seek further education or experience financial freedom.
Have you ever registered a Trust?