More individuals are putting their assets into Trust, allowing for flexibility in addition to providing for an effective and efficient management, protection and distribution of family’s assets.
Unlike a Will, a Living Trust takes effect during your lifetime and is funded with most or all of your assets by simply transferring the legal title of the assets to your Trustee.
There are two types of Living Trust viz: a Revocable Living Trust, which can easily be amended or terminated during your lifetime; and an Irrevocable Living Trust, which cannot be altered by you except by the order of court or by the consent of both the Settler and the beneficiaries to the Trust.
Benefits of a Living Trust over a Will are numerous and include:
During the course of obtaining probate, the court is saddled with the responsibility of determining the validity of your Will and supervising the payment of all your debts and taxes as well as the distribution of your Estate to the people you named in your Will as Beneficiaries. This process may take years and assets that you leave to your Beneficiaries by a Will must scale the hurdles of probate. Unlike a Will property transferred through a Living Trust does not go through this process. Hence, a Trust arrangement is an easier and faster mode of transferring assets.
When assets passthrough probate, a higher cost is incurred. Besides Solicitor’s fees in circumstances where your Estate is subject to litigation after your death, other named fees are generally set by law and are usually based on the size of the Estate being probated rather than on the amount of time and work involved.
All of these can substantially reduce the value of your Estate that is left to be distributed to your beneficiaries. With a Living Trust, these fees and costs can be significantly reduced. Your assets are transferred immediately to your designated beneficiaries outside the court system and in accordance with your specified instructions as contained in the Trust Deed. Costs of administration of a Living Trust are also minimal and are generally based on the actual time and/or services required and rendered.
If you decide to set up a Living Trust, you can create a “pour-over” provision in your Will which adds other assets to the Trust after your death. Thus, all of your assets will be in a single unified form managed by one Trustee under a single Trust Deed.
When an Estate goes through probate, the court freezes the assets listed in the Will and gives persons disputing the genuineness of the Will the opportunity to contest the Will. Creditors are also invited to come forward with their claims and the Testator’s heirs also have the opportunity of challenging certain gifts made under the Will, if they so desire. Some heirs may even go to the extent of challenging your soundness of mind at the time you made the Will. Examples abound in the numerous cases that have been decided by our courts in this regard.
With a Living Trust however, assets are never frozen and can be distributed to your designated beneficiaries immediately without the high technical requirements of probate disposition. The Trust assets can also be protected from your creditor(s) and/or lawsuits filed against you or your beneficiaries. In addition, you can protect a distribution to a beneficiary from being reached by the beneficiary’s creditor(s) and other persons who may want to lay claim against the beneficiary’s assets.
Where a Trust is in place and minors are the beneficiaries, the Trustee can manage and invest the Trust fund free of the costs and restrictions that may arise when a court appoints a Guardian to supervise the property until the beneficiaries reach the age of maturity. Also, a Trustee can continue the management of beneficiary’s assets to whatever age you desire unlike guardianship under a Will, which must terminate upon the minor beneficiaries attaining the age of majority.
Setting up a Living Trust can provide the required attention to the management and distribution of your assets. A Living Trust affords you and/or your appointed Trustee the advantage of taking investment opportunities and, conversely, to dispose of investments that are no longer desirable. With a Living Trust, the management of your investments can go on unhindered, ensuring the required income shift from yourself to your stated beneficiaries. With Corporate Trustees, you are assured of the continuity of your business as against the use of individuals or group of individuals.