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Should I make a Will or create a Trust?

article19th Sep, 2022
5 min read

This is a question that many people come to during their search, and in short, you should have both.

Many people have accumulated wealth over the last few decades and are now starting to consider how to pass that wealth down to their family in the future. We have created an article here to explain why it is beneficial to have both a Will and a Trust for your legacy planning, and how to better protect your wealth for future generations.

What is the difference between a Will and a Trust?

Will
It is a legal document created to express your wishes in relation to your wealth. It generally includes wishes from the distribution of your investments, properties, businesses and personal belongings, to the guardianship of your children and pets. This document only takes effect upon your passing and the distribution has to go through the probate courts. If you have assets overseas, then you can consider creating separate Wills for each jurisdiction to protect your assets and your family.

Trusts
A Trust is a fiduciary arrangement made between you and the trustee to make decisions on how to manage your financial affairs during your lifetime and after you pass away. There are different types of Trusts:-

Testamentary Trust
It is a Trust set up in a Will and is to be arranged by the trustees when you pass away.

After you pass away, your estate is usually frozen until the court completes their internal process. During that time, your trustees may not be able to set up a Trust until the court process is complete, and this can take at least 6 to 9 months.

If you are still alive but mentally incapacitated, then this would not take effect, as the Will would only be effective when you pass away.

Standby Trust
This type of Trust allows you to set up one now for it to be used later, usually after you pass away or when you become mentally incapacitated. People would generally put a small amount of assets into the Trust, and have it on standby until an event triggers.

Living Trust
With a living Trust, you basically move your assets into a Trust now for asset protection and other benefits. The trustee then becomes the legal owner of your assets and you have a contractual arrangement with the Trust company on how you would like them to manage and distribute your assets.

Should I write a Will?

Everyone should write a Will.

How does it work?
Even if you already have an insurance and or Trust structure set up, your Will covers the rest of your assets not covered by these legacy planning tools. Examples such as cash in the bank, properties not held in Trusts, investments in brokerage accounts, private shares, your personal belongings, your funeral wishes and the appointment of guardians for your children and pets.

There are also other estate planning considerations, such as temporary guardians for your children, choosing your end of life wishes and choosing an attorney to manage your financial affairs if you become mentally incapacitated. These are only some examples where Trusts and insurances may not be able to fully cover every situation.

I have oversea assets
It is especially important to have Wills written if you have assets in different countries around the world, as a well prepared estate plan can reduce costs and stress for those who are dealing with your stuff.

It gives you and your family peace of mind, reduces stress and disputes within the family, gives you control over who receives what, helps you preserve wealth, and even reduce inheritance tax if your Wills are written properly.

If I have a Will, do I need a Trust?

As explained above, a Will is necessary to cover all of your assets and to ensure that your legacy is passed on to your loved ones. A Trust can protect your assets and ensure that your loved ones receive the maximum benefit from your estate.

What are the benefits of creating a Trust?

There are many benefits to creating a Trust, and the following are examples of how standby/living Trusts will benefit you in protecting your wealth and your family:

Asset protection
Trusts can be used as an asset protection vehicle. Once you pass your assets into a Trust, you are no longer the legal owner of your assets, so if, for example, you are going into bankruptcy, getting a divorce, going through a litigation matter, your assets could be safeguarded by the Trust structure.

Tax planning
If you transfer your assets into a Trust, you could structure it to potentially avoid or even eliminate paying high taxes in relation to any income, capital gains, or inheritance tax.

Avoid probate
In most common law jurisdictions, your assets would need to go through the probate process in court before any of your assets can be transferred to the beneficiaries in your Will. If you have a Trust, then anything that is transferred into it would not be required to go through the probate process and therefore could reduce a lot of hassle in that regard.

Confidentiality
Your Will is a public document and anyone can request to access it. So it is advantageous to keep your Will simple and insert the nitty gritty details in a Trust which is confidential.

Avoid forced heirship
A Trust structure can also help avoid forced heirship, which applies to many civil code jurisdictions and Islamic countries.

Protect the weak
Having a Trust set up during your lifetime means that you can make preparations now to protect those who are unable to manage their financial affairs, such as children, the disabled or family members who are suffering from mental illnesses.

Preserve family assets
Instead of giving your estate away to specific beneficiaries in your Will, you can choose to keep you legacy in a Trust with provisions to the family when needed.

Continue family business
Putting your business into a Trust enables your trustee to continue with the business after you pass away, without the risk of liquidating the company.

Legacy planning can be simple and straight forward if you have the right specialists to guide you through the way.

Services

NobleWills
NobleWills, a trusted Will writing company for those who are looking for a one-stop estate planning service at a reasonable price. Our Will writing service is available both online and through personal consultation, and we specialise in cross-border estate planning solutions. For more information, visit https://www.noblewills.com/

Sovereign Trust
Sovereign opened its first office in Gibraltar in 1987 and has since grown into one of the largest independent corporate and Trust service providers with a presence in over 20 jurisdictions around the world. They currently manage over 20,000 structures for a wide variety of clients – companies, entrepreneurs, private investors or high net worth individuals (HNWIs) and their families – and have assets under administration in excess of £20billion. For more information, visit https://www.sovereigngroup.com/

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