Many clients who are new to trusts often assume at first that this is an investment scheme, and even more often they assume that it is a tool for tax evasion and debt avoidance.

In fact, trusts are advertised in a variety of ways and there are many propaganda claims that deify trusts in order to attract more clients.

Let’s take the mystery out of trusts here.

1. Is the trustee simply an employee of the commissioner?

In practice, the trustee is independent of the trustee and the trust is also independent of the trustee, so, strictly speaking, the trustee cannot be an employee of the trustee. This is because once the trust is established, the trustee is subject to the instructions in the trust agreement established by the trustee’s will, so it becomes appropriate to consider that each act is for the benefit of the beneficiaries. In the most extreme case, if there is any possibility of contravening the terms of the trust agreement or the interests of the beneficiaries, the trustee should refuse to carry out the changed instructions in order to protect the administration of the trust and the ultimate interests of the beneficiaries.

2. After the trust is established, can the trustee and beneficiaries no longer pursue their trust administration responsibilities against the trustee?

Even if the trustee is independent and not constrained by the trustee or beneficiaries, the trustee or beneficiaries may file a complaint against the trustee if the trustee fails to effectively implement the terms of the trust and protect the interests of the beneficiaries. If the situation does not improve, the trustee may also request a change of trustee or termination of the trust.

3. Can the trust hide its identity?

Many clients believe that trusts are stand-alone entities and that it is easy to hide assets within them. In reality, however, due to the implementation of anti-terrorism and money laundering regulations and the coordination of information exchange under tax treaties and other regulations, when a trust is set up and assets are transferred, the trustee company must examine not only the quality of the assets, but also the background of the trustee. The ability to conceal identities is not as high as said, as the trustee must still deal with regulatory investigations and reporting of relevant assets after the trust has been established.

4. Can a trust evade taxes?

When many clients hear the word “trust,” they think of tax avoidance. In fact, many professional tax attorneys use trusts to manage their clients’ taxes and in some cases, use the features of a trust to reduce their clients’ tax burden. However, many ordinary people should not assume that trusts can be used to evade taxes. In fact, many trusts do require tax reporting and tax payments. It is only through a professional arrangement that the client is able to reduce the final tax bill.

5. Can a trust legally avoid the debt?

You’ve probably heard that trusts can be used to legally avoid debt. Many failed business owners may move their assets into an offshore trust before they go bankrupt. Technically, if a creditor is found to have made such a move, it is certainly subject to recovery and the trustee may be forced to dissolve the trust in order to pay off the trustee’s debts. However, if the trust has been established for a long period of time and is completely independent of the trustee, there is no way for creditors to recover the trust assets. For this reason, accountants and trustees often recommend to their clients to set up the trust early to protect themselves and their families in the long term.