ALL ABOUT TRUST
What is Trust?
A Trust is an estate planning instrument for an Individual to ensure that his assets are protected and looked after by a Trustee or Trustees for the benefit of the trust beneficiaries.
There are three parties involved in a Trust.
- The Settlor – Person who sets up the Trust.
- The Trustee – The person or a corporation who manages the Trust assets
- The Beneficiary – the person who receives benefits from the Trust
How does a Trust work?
The Trustee receives the assets from the Settlor and is legally obligated to hold and manage the assets for the enjoyment of the beneficiaries during the trust period set by the Settlor.It is commonly known as “Living Trust”
What Assets can be included in a Trust?
The assets commonly used to set up a trust are: cash, insurance policies, unit trust, properties, shares. The property under the Trust does not belong to the Trustee personally. Though the trust property is registered in the Trustee’s name, it is NEVER part of the Trustee’s own properties when he dies. Only the Trust beneficiaries will be entitled to the Trust Fund NOT the Trustee’s own beneficiaries.
Example of Comon Usage of Trust
Distributing Wealth To Avoid Grant Of Probate
- Minor children and spouse who is a homemaker or who is not the main breadwinner.
- Special children requiring funds for medical, education and living expenses.
- A second family to provide for.
- To finance children’s tertiary education.
- Proctecting Against Spendthrift Beneficiaries
- The Protector appointed will ensure there is no wastage of moneys receives under the Trust. Protector can stop disbursement of fund to undeserved beneficiaries.
- Against Creditors of Settlor and Beneficiaries
- Protector will instruct Trustee to stop the disbursement of fund when any beneficiary has become a bankrupt.
- Protecting Wealth Against the Settlor's Creditors
- When a person becomes a bankrupt, usually an investigation by the authorities is done to recover assets transferred up to 5 years prior to bankruptcy. Any questionable transfers may be nullified to recover the assets to pay the creditors.
Protecting Wealth Against The Beneficiaries’ Creditors!
Preserving Wealth For Your Great GrandchildrenPreserving assets for your great grandchildren.
To Cater Funds For Various Family Situations
Who is the Protector of Trust?
A person appointed by the Settlor with the following job scope:-
- Act as a watchdog for the Settlor when he passed on
- Advise the Trustee on the needs of beneficiaries
- Recommend payment to beneficiaries using Letter of Wishes
- Have the power to remove and replace the Trustee
WHY DO PEOPLE SET UP A TRUST? IT IS BECAUSE...
- Assets held under Trust are not frozen upon demise.
- For the distribution of wealth, including periodical payment.
- To ensure the wealth is protected against lawsuits as well as creditors.
- The preservation of wealth.
- Fulfilling various personal objectives, including maintenance of dependants and education funds.
Benefit of living trust
- Distributes the way you want it to
- For example, set goals to be achieved (such as a college degree) before your loved ones receive anything from the trust or to be used for their medical expenses. This avoids wastage of the trust fund.
- You decide who to receive
- Just like a Will, it is your choice, no one can challenge it.
- No fuss and instantly available as it is not part of the estate
- No lengthy legal process. Trust Fund is readily available for the beneficiaries’ use because it is in the Trustee’s name. It complements the Will you wrote.
- Have peace of mind
- Once the trust is created and the Protector appointed, the well-being of your beneficiaries are taken care of.
- Assets can be protected from creditors - Irrevocable Trust
- When assets have been in the trust for more than 5 years.
- Not easily contested
- Disgruntled family members who are not receiving anything from the trust are unable to make claims against the trust because the assets are no longer under your name.
- Your instructions on distribution in the Trust Deed can prevent your wealth from being squandered
A COMPARISON OF A TRUST AND A WILL
|When is the actual transfer of assets?||During the lifetime of the Settlor.||After the demise of the Testator and Grant Of Probate extracted.|
|When does it become effective?||Upon transfer of assets to the Trustee or triggering event.||Upon the demise of the Testator|
|Will the assets be frozen upon death?||No.||Yes.|
|Is it necessary to apply to the Court?||No.||Yes, must apply for Grant Of Probate.|
|Can there be more than one?||Yes.||The latest Will prevails.|
|Can it be revoked?||Yes, the Settlor can revoke when the trust is revocable one.||Anytime by the Testator before his demise.|
|Creditor protection?||Yes, if it is irrevocable and after 5 years from the date it was created.||-|
|Can conditions be stated?||Yes.||Yes.|
|Can I give to any person/organization I choose, even if unborn?||Yes.||Yes.|
|Can additional assets be included?||Yes, by doing a supplemental deed.||Yes, by rewriting the Will or the new assets will be distributed under the residuary estate.|
|Can the Trustee/Executor be removed?||Yes, by doing a supplemental deed.||Yes, by rewriting the Will.|
|Can the Protector remove and appoint the Trustee?||Yes, subject to such conditions as may be stipulated.||There is no Protector. Testator can reappoint Trustee by rewriting his Will.|
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