Your money: Guarding against the future - it's all a matter of trust

There are many advantages that lead people to set up trusts. Among the main ones:

* A properly established trust cannot be contested in the same way as a bequest under a will, giving greater certainty that your wishes will be implemented.

* Difficulties with the combining and distribution of matrimonial property can be avoided through the use of trusts.

* Trusts can provide a certain level of protection from creditors.

* There may be some tax savings.

* A trust may offer protection if estate duty is reactivated or if capital gains tax is more widely implemented.

* Certain trusts can be set up for a specific purpose, such as education.

* A trust may exempt assets from current and future asset testing.

Everyone considering a trust has different reasons, but some of the most common are:

* Protection of families.

* Protection of, or providing for, individuals. Here an amount is set aside and might either be held until that individual reaches a certain age, marries or until a certain event occurs.

* Protection of a person with a disability. Funds can be set aside for that person in the knowledge that the trust will continue on beyond the settlor's lifetime.

* Providing for education. Education trusts are very popular given the rising cost of all forms of education, especially at the tertiary level.

* For health savings. By regularly setting aside money into a trust, you can effectively insure your own health.

* Protection of assets against creditors or other claims. It is now common for people who are either in business, might have given guarantees or be acting as company directors or trustees and thereby potentially incurring legal liabilities, to set aside their assets in trust. If claims arise against them, their personal assets will be protected.

* Protection of assets for future generations. By using a trust, a person can set aside assets for future generations. It has become popular for people to put assets such as house properties in trust for their children or future generations.

* Matrimonial circumstances. Trusts, in conjunction with a matrimonial property agreement, can be used to make a marriage settlement when a couple are about to become married and do not wish their assets to be mixed together, or in cases where people are married or in a relationship and wish to protect assets for their own children as distinct from their partner's children.

* For charitable purposes. This has long been a popular reason to establish a trust. A charitable trust can ensure that the trust's capital will not be caught up in any financial difficulties a charity might suffer. The bequest will continue to provide benefits for the charity over a long period. It is also possible to secure ongoing recognition for the benefactor.

* Tax planning. The general object here is to take income out of the hands of the person who is on a higher tax rate and either capitalise the income so that the tax is paid by the trust or pass it on to other beneficiaries who are on lower tax rates. There can be significant tax savings.