It's important to understand the difference between private and public trusts when planning your estate. Both types of trusts serve important but different purposes, and have their own set of rules and regulations. Today we explore the differences between private and public trusts. Elevating your understanding and helping you make informed asset decisions when writing your will.
You might have a rough idea of the difference between private and public trusts. But when it comes to the legal terminology and direction these arrangements take, it’s very important to get specific on how they’re distinguished. First, let's recap exact definitions; refreshing your understanding of exactly what a public and a private trust are, and how these legal arrangements could look for you.
A private trust is where a trustee holds and manages assets on behalf of specific, and known beneficiaries. The trustee is responsible for managing the assets in the trust and making sure that they are used for the benefit of the assigned beneficiary or beneficiaries. Private trusts are usually set up by individuals or families for a specific purpose, such as providing for a child's education or managing assets for a loved one who is unable to do so themselves.
A public trust is a legal arrangement where a trustee holds and manages assets for the benefit of the general public. These trusts are usually set up by organisations or governments for a specific purpose, such as managing a park or preserving a historical site. Public trusts are usually established for charitable or public purposes and are subject to stricter rules and regulations.
Key Similarities between Private and Public Trusts
So, private and public trusts are both legal arrangements, which assign someone else to hold, manage, and later distribute your assets to other people. For Private trusts, this would be a specified beneficiary or beneficiaries who you probably know, or are related to. For Public trusts, these would be unspecified, unknown beneficiaries who receive the assets as a part of a charitable scheme. But is the difference between public and private trusts really as simple as who the beneficiaries are? Let's have a look.
Key Differences between Private and Public Trusts
Control and oversight: In a private trust, the beneficiaries have a high level of control and oversight over the trust assets, as they are the ones who will ultimately benefit from them. In a public trust, however, the beneficiaries have less control and oversight, as the assets are managed for the benefit of the general public.
Transparency and accountability: Private trusts are typically more private in nature and not subject to as much public scrutiny. In reflection of their goal to benefit wider society, public trusts in contrast are subject to much more transparency and accountability.
Taxes: Private trusts are subject to different tax rules than public trusts. Private trusts are generally subject to income tax on their earnings, while public trusts may be exempt from certain taxes. Given that public trusts are often tied to charitable schemes, whilst private trusts may be tied to financial gains for a specific family- the breadth of the benefits reflects the taxation rules.
To Wrap Up
A private and public trust are fundamentally different, in ways which suit different goals. Whether that’s supporting your family or giving back to your community, a public or a private trust fund can represent meaningful ways to manage your assets for the future. Considering which, if either, is right for you is a relevant consideration when you're writing your will. It might be the first time you’ve taken a proper inventory of your assets, or just the time to think about the good these assets could do after you're gone.
If you're still undecided, Safewill offers the most flexible will writing service on the market, to update your asset management wishes over time. So get started with a call with one of our experts today, on 1800 103 310 , or via live chat now.