Trusts have long been seen as an investment instrument for the well-heeled, but many people now realise that they can be useful and relevant legacy-planning tools. While wills are essential, trusts are also important because of our growing wealth - based on the potential value of our estate upon death - and the vulnerable beneficiaries we may have.
If you have $1 million when you count your cash, homes and insurance proceeds and have vulnerable beneficiaries which would include minors, adults who cannot handle money (such as offspring who are young adults), senior citizens (like parents) and persons with special needs, ask yourself if you would give $1 million to such vulnerable beneficiaries in a lump sum... would you say yes? Most would say no.
Yet most do so in the end because most don't even write a will, let alone (set up) a trust. There are also people who use trusts to ensure that their wealth is kept within direct family members such as spouses, children and grandchildren but leaving out children's spouses and their in-laws. People in high-risk business with exposure to potential creditors can also set up a trust to shield part of their assets.
If you have $1 million when you count your cash, homes and insurance proceeds and have vulnerable beneficiaries which would include minors, adults who cannot handle money (such as offspring who are young adults), senior citizens (like parents) and persons with special needs, ask yourself if you would give $1 million to such vulnerable beneficiaries in a lump sum... would you say yes? Most would say no.
Yet most do so in the end because most don't even write a will, let alone (set up) a trust. There are also people who use trusts to ensure that their wealth is kept within direct family members such as spouses, children and grandchildren but leaving out children's spouses and their in-laws. People in high-risk business with exposure to potential creditors can also set up a trust to shield part of their assets.
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Below are 5 Legacy Planning tools that you need to know:
The ultimate distributions to them should be delayed for a certain time to ensure they get their inheritance when they reach a certain age or maturity.
- WILL
- TRUST
The ultimate distributions to them should be delayed for a certain time to ensure they get their inheritance when they reach a certain age or maturity.
- LASTING POWER OF ATTORNEY (LPA)
- ADVANCE MEDICAL DIRECTIVE (AMD)
- NOMINATION OF CENTRAL PROVIDENT FUND SAVINGS
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Trust is a legacy planning instrument that most are not aware of.
In a nutshell, a trust is a legal arrangement that allows an individual to place his assets such as shares, money and property such that an appointed person or trustee can manage and administer them for the benefit of others (beneficiaries).
In the past, trusts were generally pitched at rich clients and offered by private banks, but now independent trust firms are offering such services on the back of the population's growing wealth.
Below are five scenarios where trusts can be relevant to you.
In a nutshell, a trust is a legal arrangement that allows an individual to place his assets such as shares, money and property such that an appointed person or trustee can manage and administer them for the benefit of others (beneficiaries).
In the past, trusts were generally pitched at rich clients and offered by private banks, but now independent trust firms are offering such services on the back of the population's growing wealth.
Below are five scenarios where trusts can be relevant to you.
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1. ENSURING MAINTENANCE OF YOUNG CHILDREN
Having the option of stating a fixed amount to be given to your children every month depending on their life stage, until they become adults.
2. SHIELDING ASSETS FROM DIVISION UPON YOUR DIVORCE
Your assets set aside in the trust for the child will never be subject to division in a divorce. This protection cannot be secured by a will, which can be revoked any time.
3. SHIELDING ASSETS SHOULD YOUR CHILDREN DIVORCE
Your assets will never be part of the children's matrimonial assets. The trust documents may also state the assets are meant only for the parents' children and grandchildren, but not in-laws.
4. AVOIDING POTENTIAL CLAIMS MADE AGAINST BENEFICIARIES
Legacy-planning specialists recommend the standby trust as an affordable and flexible tool. This is a distinctive trust that caters to the client who may decide to transfer some of his significant assets into trust only at a future date. It is an alternative proposition as the client may have no need to transfer his assets while he is mentally lucid. A standby trust offers more confidentiality than a trust set up from within a will (known as a testamentary trust) and amendments to the so-called "Letter of wishes" can be made at little cost. When the trust is on standby mode, the annual costs are typically nominal, starting from $250, and include reviews of your wishes.
5. LENDING MONEY FROM A TRUST TO A BENEFICIARY FOR PURCHASE OF A RESIDENTIAL PROPERTY
Your inheritance to your children gives them a head start in their lives but is controlled until such time when the young beneficiary becomes of age and is financially more mature.
Having the option of stating a fixed amount to be given to your children every month depending on their life stage, until they become adults.
2. SHIELDING ASSETS FROM DIVISION UPON YOUR DIVORCE
Your assets set aside in the trust for the child will never be subject to division in a divorce. This protection cannot be secured by a will, which can be revoked any time.
3. SHIELDING ASSETS SHOULD YOUR CHILDREN DIVORCE
Your assets will never be part of the children's matrimonial assets. The trust documents may also state the assets are meant only for the parents' children and grandchildren, but not in-laws.
4. AVOIDING POTENTIAL CLAIMS MADE AGAINST BENEFICIARIES
Legacy-planning specialists recommend the standby trust as an affordable and flexible tool. This is a distinctive trust that caters to the client who may decide to transfer some of his significant assets into trust only at a future date. It is an alternative proposition as the client may have no need to transfer his assets while he is mentally lucid. A standby trust offers more confidentiality than a trust set up from within a will (known as a testamentary trust) and amendments to the so-called "Letter of wishes" can be made at little cost. When the trust is on standby mode, the annual costs are typically nominal, starting from $250, and include reviews of your wishes.
5. LENDING MONEY FROM A TRUST TO A BENEFICIARY FOR PURCHASE OF A RESIDENTIAL PROPERTY
Your inheritance to your children gives them a head start in their lives but is controlled until such time when the young beneficiary becomes of age and is financially more mature.
A version of this article appeared in the print edition of The Sunday Times on October 08, 2017, with the headline 'Trusts are not just for the well-heeled'.
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