Trusts as Financial Planning Tool


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Dear Tenzing Pacific,

I am a keen investor who has been living in Vietnam for around 6 years now. I have a few property investments abroad, and I own a small stock portfolio. I have a son who is 6 years old and is about to start his first year of school and would like to set aside the majority of my investments to finance his university education when he comes of age. I am worried that if I happen to pass away while living in Vietnam that my estate, as stipulated in my will, may fall victim to disputes among my family members after I am gone and that my son might run the risk of not receiving what he is due. Also, I would not want the funds intended to finance his education to be exposed to excessive taxation upon my death. I’ve been told that setting up a trust might solve my problem. Could you explain how a trust works in a bit more detail?



Hi Bruno,

There are two things, which you are guaranteed in life:

1) you will pay taxes
2) you will die.

Obviously, the fact that you have dependents and your pending mortality might make you a little anxious about the future of your personal estate.


What is a trust?

Trusts used to be reserved for the aristocracy as a mechanism to transfer wealth across generations. Large corporations, the likes of Standard Oil and JP Morgan, were even referred to as “trusts” in the early 20th century. Nowadays a trust is available to anybody. The trick is to find a suitable person to act as trustee.

In layman’s terms, a trust allows you to hand over your assets to a professional who holds them for the benefit of a third party. The person who you would hand your assets over to would be known as the trustee, which could be a person or a company. As the primary contributor to the assets, you would be known as the settlor. In this case, the third party would be your son, who is known as a beneficiary under the agreement.

Who should be the trustee?

 The above structure is akin to having the portion of your assets run as a separate company. You might think that handing over your assets to a third party is a crazy idea, especially if you are considering appointing your estranged, bi-polar brother-in-law as the trustee. The good news is that there are many companies who specialize as trustees. A great example is a Sovereign Trust in Hong Kong who could set you up via your independent financial advisor in Vietnam. The bad news is that if you would like a company to act as your trustee, the value of your assets would have to be extremely high.

What are the main benefits of a trust?

The main benefit is that you would be assured that the assets held within the trust would be distributed to your intended beneficiary upon your death, without the hassle, delays and legal proceedings of having your estate split up via your will. The legal agreement is also very concrete. If you were to pass away when your son was 16 years old and he was to receive his inheritance straight away, it’s possible that he would run away from home and spend all the money, as any teenager would. With the trust, you could stipulate that he would only be able to receive a portion of the funds when he reaches a certain age. Secondly- your inheritance tax situation. Trusts can heavily mitigate inheritance taxes. However certain jurisdictions, like the US and UK are constantly looking to change laws to allow trusts to be taxed more heavily. Therefore, jurisdictions like the Isle of Man, Guernsey and Jersey would be most efficient, dependent on other technical factors of course.

For a trust to be most effective you would have to have no beneficial interest in the assets held within the trust. Luckily, your death will ironically benefit many because you managed to protect your assets from your squabbling relatives through your shrewd judgement of setting up the trust.

If you have more questions, please feel free to Contact us for more advice on trusts.

Best Regards,

Tenzing Pacific Investment Management

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