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Leaving property in a trust

Due to the fact that properties passed on by benefactors to their heirs are taxed higher on capital gains if they are in trusts than they would be if they were given directly to the individuals concerned, this method of leaving property to others is not as widely used as it used to be.

Through a well-managed trust the beneficiary can be taught over a period of time to be fully responsible and become a worthy inheritor.

However, provided great care is taken in selecting the trustees, trusts can be a good means of ensuring that the beneficiaries act responsibly with their new inheritance.

There will always be those heirs who are likely to misuse or even sell a revenue-producing property if given the chance to do so.

A good trustee, empowered by the benefactor to act in specific ways, will see that a property has the right tenant, is well-maintained, that the rent is collected and that the revenue is wisely invested and not ‘blown’ on frivolous expenditure.

Through a well-managed trust the beneficiary can be taught over a period of time to be fully responsible and become a worthy inheritor.

Long experience in the property field has shown that quite often a person whom the benefactor has found to be completely reliable and trustworthy during his lifetime becomes a different sort of personality once given control of a trust, and may well use his power of attorney to ensure that he benefits from the trust far more than he should.

It is vital, therefore, that the benefactor be shrewd and far-sighted in the appointment of all trustees.

“Ideally, two or three trustees, not from the same ‘camp’, should be appointed so that they monitor and control one another. This is sometimes not easy to achieve as trustees can get into partnerships with each other and work together for their own good.”

Nevertheless, Rawson says trusts controlling a property can be an excellent way of seeing that an inheritance is preserved and wisely used. If, therefore, there is any question as to the maturity and responsibility of the heirs, trusts should still be considered as a means of passing on property, he says.

Source: http://www.property24.com/articles/leaving-property-in-a-trust/18694

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