What is a Trust?
A Trust is an arrangement under which a person or a group of people are made responsible for assets for the benefit of another person or group of people.
The people responsible for the assets and who administer the Trust are known as ‘trustees’ and those who benefit from the trust as ‘beneficiaries’. The person who sets up the Trust is known as the ‘settlor’.
The arrangement is set up in a way recognised by law and the Trustees are subject to legal controls. It is, often, set up by a written document called a ‘Deed of Trust’.
The assets are then held in the trust and will be dealt with and released as directed by the Deed of Trust. For example, they might be used for the benefit of Mr A until his death and then for the benefit of his children, or kept safe by the Trustees until someone reaches the age of (say) 25.
Why should you think of using a Trust?
There are a number of reasons. Trusts can reduce inheritance tax, simplify the inheritance process, protect your assets from attack by creditors, safeguard young children or people with limited life-skills, make sure assets are properly looked after and do many other things. However, they are definitely not for everybody.
What is the downside of using a Trust?
Cost and complexity. Setting up and administering a Trust both cost money and many people like a simple life, where their affairs are easily understood by them and their families.
Sometimes, if Trusts try to be too ‘clever’, they can be attacked by (for example) the tax authorities. The cost of that can outweigh all the benefits.
Can you use a trust in Turkey?
Turkey recognises the concept of Trusts. You can set up a Trust as per the Civil Code of Turkey; this should be a legal entity registered with the Directorate General of Foundations.
However, the definition and operation of “Trust” in Turkey and your home country will differ. Trusts in Turkey cannot be used in the wide range of circumstance in which they can be used, for example, in the US.
This does not mean that Trusts cannot be used in Turkey at all. There are occasions on which it is convenient for assets to be owned on behalf of a group of people but not directly in the names of each of the members of that group. This could be for many reasons, not the least of which could be the size of the group.
In these cases, the asset could be owned by (for example) a Turkish limited company, the official shareholders of which were a few individuals who held the shares on trust for the rest of the group. Owning the shares in this way would have no impact in Turkey. The owners would be treated as the full and beneficial owners of those shares. However, if the shareholders (the Trustees) came from a place where Trusts were recognised, then the rights of the rest of the group could be enforced in the country in which the official shareholders were resident.
If the beneficiaries were also resident in that country then this could be quite a neat and cheap way of reducing complexity.
Turkey also has the concept of Foundations (vakıf). These have some of the same characteristics of Trusts, but Foundations are usually established for charitable purposes or for the management of immovable assets (land and buildings) belonging to big families.
How do you find out more?
You will need to consult a financial adviser who is familiar with the use of Trusts. This could be an adviser in Turkey or one in your home country.