You may have wondered why large families and wealthy individuals often have family trusts.

You may even have contemplated the benefits of having a trust or thought about establishing one yourself. Chances are, however, that trusts remain a bit of a mystery to you.

Hopefully, some of that mystery will be revealed today as I discuss the topic of family trusts. Trusts have many other uses, of course, but I will leave that discussion for a later column.

A trust is a relationship. It arises where a person known as a `settlor' or `grantor' transfers property to a person or trust company acting as `trustee'.

The trustee is compelled to hold this property for the benefit of another party or parties known as the `beneficiary' or `beneficiaries', or for a purpose permitted by law.

There may be another party in the relationship known as the `protector' whose role I will also discuss.

This relationship is set out in a trust deed, a document that sets out the duties, responsibilities and powers that arise from it. One important consideration is who will act as trustee of your trust.

Remember that you will be transferring your hard-earned assets to your trustee and will no longer have control of them. Consequently, it is extremely important to choose respected and trusted individuals such as a relative, friend or advisor, or alternatively appoint a professional such as a trust company to fill this role.

It is common to have more than one trustee of Bermuda trusts, especially where real estate is concerned.

But what if the trustee shuns his duties and no longer acts in the best interests of the beneficiaries? Have a protector who may fire the trustee and appoint another. The protector may be a close family friend or professional advisor and should be a person familiar with the circumstances and needs of the beneficiaries, the family background and your wishes with respect to the trust. The protector may also have the power to change the law that governs the trust.

Any asset capable of being owned may be held on trust. However, it should be borne in mind that there are stamp duty implications on the settlement or transfer of Bermuda property, such as your house, or Bermuda currency, to a Bermuda trust. These rates currently mirror those payable on death.

Foreign currency assets may be transferred to a trust without payment of stamp duty. Despite the immediate costs, there are advantages in settling Bermuda assets in trust, such as protection against increasing stamp duty or property values prior to your death.

Trusts can be of benefit to private individuals in a number of ways, most notably in the areas of family wealth preservation, retirement planning, providing for children and grandchildren with special needs, providing for minor dependants, and the protection of assets.

Asset protection trusts are a tool for protecting one's assets from creditors' claims, provided that the assets are placed in trust at a time when no creditors are on the horizon.

If you decide to place assets in a trust, these assets may be outside the net of your estate for tax purposes. Moreover, the assets will be immediately available for the benefit of chosen beneficiaries, without the necessity of applying for probate which can be an expensive and cumbersome exercise, particularly where assets are held in a number of countries.

Many people, once they live away from their home country, can achieve substantial benefits by transferring assets to trustees located in a jurisdiction such as Bermuda.

If the trust is properly structured the burden of taxation in the individual's country of domicile or residence can be substantially mitigated. Despite the various uses and benefits of trusts, it should be remembered that trusts cannot last indefinitely.

A trust will usually last for a term of up to 100 years, after which time the assets, if they still exist, must be transferred to the beneficiary or beneficiaries named in the trust deed.

It is important to ensure that the trust deed is properly drafted so that the assets will not result back to your estate at the end of this period, which could eliminate any tax or estate planning benefits.

If you are still thinking about establishing a trust, perhaps because you are sold on the notions of privacy and long-term estate planning protection associated with them, then it is time to seek more tailored advice.

Speak to someone knowledgeable in the area of trusts to determine how best they can be utilised to achieve your estate planning objectives.

*** Attorney Vanessa Lovell is a member of the Trusts and Financial Structures Team of Appleby Spurling & Kempe.

Copies of Ms. Lovell's columns can be obtained on the Appleby Spurling & Kempe website at www.ask.bm.

This column should not be used as a substitute for professional legal advice.

Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.