Trust
A trust (sometimes known as a trust fund) makes sure that your funds are going directly into the hands of those you wish. It’s a means of securing your money for after you are gone, or to support beneficiaries in life — allowing you to see the benefits of your inheritance before it is too late.
What is a Trust?
A trust is a highly valuable estate planning tool. One that can be beneficial regardless of your background, your net worth, or what you have to leave behind. The purpose of trusts is to provide peace of mind. You can place assets aside for loved ones, so they can benefit from them in a responsible manner.
When it comes to a trust, there are generally three parties involved. The person providing the fund is called the grantor, the one inheriting is the beneficiary, and the party managing the fund is referred to as the trustee. The role of a trustee is to ensure that the assets are used in accordance with the grantor’s wishes. This prevents spending sprees and funds being used outside of the wishes of the grantor, allowing beneficiaries to enjoy their windfall responsibly.
As the grantor, you can set out the precise terms of the fund however you see fit. The conditions you put in place will outline how and when your assets are to be distributed by the trustee. Common practice is for funds to become accessible once a beneficiary reaches a certain age or achieves a milestone in life (graduating university, getting married etc.)
Trusts can come in a variety of different forms and guises depending on the unique situation behind them and the stipulations dictated. The different types of trust available include: asset protection trusts, family trusts, and property protection trusts.
It is possible to hold all manner of different assets in a trust. This includes but is not limited to:
- Money
- Stocks
- Assets
- Family Heirlooms
- Real Estate
- Businesses
- Land
Why Set Up a Trust?
protection and support for your loved ones. Trusts should be seen as cornerstones of estate planning. This is vital if you want your money to go as far as possible, or have specific requests regarding how/when it is to be handed out.
A fund is designed to benefit anybody, regardless of how many assets they have. This is because a trust is the best method of managing assets and ensuring that they are distributed exactly according to your wishes.
However, they can be complex to understand if you are unfamiliar with their structure. This can put a lot of people off and force them to automatically pivot to a will without considering if trusts would be a better option. If you are unsure about setting up a trust, contact a specialist today who will talk you through the process.
A huge benefit of a trust is that, unlike a will, you are able to see your assets distributed before you have passed away. The flexibility that comes with this form of estate planning means that you are able to see your money contribute to your chosen organisation, pay for the education of your family, and more. Additionally, a trust ensures that you bypass probate, saving your beneficiaries large amounts of money. This ensures that your money is able to go a lot further.
How to Set Up a Trust
Setting up a trust to support and care for your loved ones either before or after you are gone can be vital in the enrichment and betterment of their lives — without including some of the added stresses that can come with other forms of bequeathment.</p> <p>The process of setting up a trust of your own should always include the following:
Do Your Research
The first step of the trust process should always be to do ample research to ensure that you are making the best decision for you and the long-term security of your assets. Deciding between a will and trust can be difficult. Both have their pros and cons.
For example, a trust is excellent for avoiding probate and reducing estate, whereas a will lessens the inheritance tax etc.
The best way to work out which option is best is to research both — look at your assets, review the fees associated with both and decide what you see as the best choice. If you are struggling to decide, you may wish to contact an independent specialist who would be able to make a recommendation using all evidence available.
Select Your Trustee(s)
Three parties are required in order to properly establish a trust: the grantor, the beneficiary, and the trustee. The trustee is the most important person in the process as they are there to ensure your assets and funds are distributed properly if you are unable to.
A trustee will also offer support to the beneficiary should they require it. They will be there throughout the entire process, explaining your wishes and making sure the beneficiary understands the terms laid out.
Identify Assets
It is important when establishing a trust that you have a clear and exhaustive list of your current assets. Having a good idea of all the assets you wish to place into the fund, as well as their values will save a great deal of time down the road. It also allows you to be more specific with where you wish certain items to go.
Choose Beneficiaries
Deciding on a beneficiary/beneficiaries usually comes down to close young family members such as your children, nieces/nephews etc., or even an organisation you are passionate about supporting, such as a charitable foundation.
Once you have decided on your list of beneficiaries, you can then consider which assets will go to certain beneficiaries and the amount they will receive.
Decide Terms
With most of the important decisions finalised, the last important thing to consider is discussing the final term with your solicitor. Things to consider at this stage include:
- How funds should be divided
- At what point assets should be distributed
- How should the trust be managed
- Can the trust be cancelled for any reason
When to Set Up a Trust
It is important when deciding to set up a trust that you begin the process as soon as possible. Things can change very quickly in life. If you keep putting it off, your fund might never get completed and you could leave your loved ones in the dark.
Additionally, the sooner you set up your trust the more you can avoid one of the biggest mistakes many grantors make; not reviewing. Regular reviews of your trust are vital. Things can change since the last time you looked at your trust and it is important that your estate plan changes as well to reflect this. An out of date plan can be almost as complicated as no trust at all.
There are a few important things to always be aware of and reviewing when it comes to your trust. This includes:
- Have there been any deaths that invalidate the trust
- Is your trustee still the right choice
- Has there been any new births in the family that should be added to the trust
- Have there been any deaths that need to be reflected
- Are there any other beneficiaries to be added
When Can You Access a Trust Fund?
The accessing of trusts is generally tied to the specific stipulations of the trust in question. For family trusts or asset protection trusts, generally the assets are accessible once the beneficiary has reached 18 or 21 years of age, has graduated from university, gotten married, or had children.
A property protection trust is a little less cut and dry. In a situation where it is stipulated that a spouse is able to remain in the home, the trust becomes active and the property passes over to the beneficiary once the surviving spouse has passed on, or is no longer able to live in the property.
It may be possible to access a fund early. However, to do so the beneficiary will generally need the full cooperation of the trustee(s).
Traditionally, the trustees are basing their decisions on the direct intentions of the grantor, meaning that if the beneficiary can’t convince them that the early release of assets is justifiable then they have no legal right to do so.
Should the issue be serious enough, it may be possible for beneficiaries to take the trustees to court over their failure to release the funds early. However, it is worth remembering that the courts more often than not will recognise the authority of the trustees.
Why Use Just Wills and Legal Services to Set Up a Trust
When it comes to protecting your assets, and supporting your loved ones, it is important that you work with a company you can have faith in. Here’s what makes Just Wills and Legal Services stand out:
Speak to an Expert
