What rich people are 'trust'ing these days

With a possible inheritance tax around the corner, trusts are back in favour, especially when it comes to wealth management and succession planning, reports CNBC-TV18's Ashmit Kumar.

Death and Taxes, the two certainties in life become quite daunting when they come together. It's to avoid these taxing times that over the last 5-6 years, more and more high net worth individuals are turning to trusts as structures of estate planning and asset management. Pranav Sayta, Tax Partner, E&Y says, "It helps in succession panning. It also separates the economic interest from management control, for greater tax efficiency, and for ensuring a sense of continuity". The biggest advantage is avoiding long legal wrangles during probate of the will. Daksha Baxi,  Executive Director, Khaitan & Co says, "trusts replacing wills,  probate of wills is a complex process,  trusts are easier to execute". Trusts provide an edge when it comes to protecting assets from demands by creditors. That's because placing assets in a trust gives the trustees ownership over the assets, thus excluding them from being drawn into a lawsuit.  Also, for promoters of companies, trusts are more attractive as they do not attract either dividend distribution tax or minimum alternate tax. Baxi also say’s, "dividend distributed by subsidiaries of the trust, when redistributed amongst the beneficiaries will not be taxed. Trustees are taxed on behalf of the beneficiaries, hence no additional burden on the beneficiaries". These advantages account for largest corporate groups, from Tata Sons to Dabur and from resorting to innovative trust structures. "Whatever concerns that arise out of loss of ownership are more than compensated for by the advantages that a trusts offers, provided that it is structured carefully", says Satya. Now there are some concerns over opting for a trust structure, especially regarding loss of ownership of assets, and the possibility of misuse by trustees. However, experts argue that these concerns are easily addressed and become insignificant against the advantages.