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Wills v Trusts

WILLS V TRUSTS

People use two primary estate planning documents to plan for the distribution of their assets after death: Wills and Trusts. Both have advantages and disadvantages, so it is important to understand the difference between them before making a decision.

Most people are familiar with the concept of a Will – it’s a legal document that outlines how you want your assets to be distributed after you die. If you don’t have a Will, your assets will be distributed according to prevailing law. 

A trust, on the other hand, is a bit more complex. A trust is a legal arrangement in which you (the trustor) transfer ownership of your assets to a trustee, who then manages and distributes those assets according to the terms of the trust. Different types of trust can be used for a variety of purposes. A revocable trust is a type of trust that can be amended during the grantor’s lifetime, while an irrevocable trust cannot be amended. Trusts can be used for estate planning, asset protection, and charitable giving.

Key Differences Between Wills And Trusts

When it comes to estate planning, many people are unsure of whether a Will or a Trust is the best option for their situation. While both options can effectively handle your affairs, there are some key differences to understand before making a decision.

1.  Effective Date

A Will does not go into effect until after you die, whereas a Trust is active once it is created and funded. This means that a Trust can be used to manage assets during your lifetime, which can be helpful if you become incapacitated or otherwise unable to manage your affairs, something a Will cannot do.

2.  Probate And Privacy

When a person dies, their estate must go through probate to confirm the Will and allow distribution of assets. Probate is a process that a probate court oversees, and it can be lengthy and expensive. If a person dies without a Will, the process is often even more complicated and can take longer and cost more.

The key feature of a Trust is that it is not subject to probate because they are not considered part of a person’s estate. This means that Trusts avoid the time-consuming court proceedings and costs associated with probate.

While a Will is typically considered a private document, the reality is that anything that happens in court is available to the public through public records. As Trusts are not subject to probate, matters can be kept private. This can benefit individuals who want to keep their affairs confidential and out of the public eye.

3.  Complexity And Cost

The cost of preparing a Will is relatively cheap and straightforward. However, Trusts can be complex and require more paperwork to establish, so they are generally more costly to organise upfront than Wills. However, avoiding probate down the road can offset the cost of setting up a Trust.

4.  Protection From Creditors

A Will is a legal document that dictates how a person’s assets will be distributed after death. However, if that person has creditors, those creditors may be able to claim against the Will.

Trusts offer asset protection from creditors, and the trust creator can condition asset allocation to family members during certain events or place restrictions on beneficiaries’ receipt of assets. This means that you can control how your assets are used even after you’re gone.

Will or Trust or Both?

When it comes to estate planning, a Will may be all you need – but if you have more complex financial affairs or want to take extra measures to protect your assets, a Trust could be the best solution.

Be sure to consult an experienced lawyer to discuss your best options and devise a plan that will work best for you and your family.

Speak to us over video consultation via Lawyer Anywhere for advice on your Estate Planning Matters today!
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True Files

When Partnerships Go Wrong

WHEN PARTNERSHIPS GO WRONG

Good relations can sour with disastrous results when you choose business partners unwisely.

We persuaded one of our valued clients to share the lessons he learnt from a bitter experience—

“I was not thrilled when my father asked me to work for him. However, I understood that he was getting on in years and needed me to take on some of the responsibilities in running the business. This was the driving force behind my decision to leave my previous job and join the company.

I asked for shares as I felt his business partner never honestly shared my father’s business philosophy or values. Unfortunately, my father died of a heart attack only 2 years after I joined him in the business. Even though I was now the majority shareholder, things went awry very quickly after my father’s death.

On the day of my father’s funeral, his partner met with our competitor in secret to try to sell the company out from under me. When I learned about the meeting, I refused to participate in the sale negotiations. Instead, the partner tried to force the sale through legal action using every trick in the book, from mismanagement and abuse of power to shareholder oppression.

Because of this, I was forced to spend time and money becoming entangled in a litigation that lasted well over three years when I should have been concentrating on growing the firm instead.

In retrospect, there are a few things I could have done, or should have known, to save me grief –

  1. You can never be sufficiently prepared to deal with a shareholder who maliciously asserts their shareholder rights in order to cause problems. Knowing your existing shareholders’ rights will enable you to stand firm in the face of allegations of wrongdoing.
  2.  You can give key employees ownership interests in the company to enable them to participate in the growth of the company without giving them potentially abusive rights to complete legal ownership of the company.
  3.  Avoid engaging in counter-offensive action as much as possible. Your restraint will earn you the respect of key employees and other corporate directors (if any); their support and assistance will be invaluable during these trying times.
  4.  Be prepared. More than any other time, you need sound and trusted legal counsel on your side.”

Contrary to popular perception, a lawyer is more valuable to you BEFORE a lawsuit arises. Speak to us over video consultation via Lawyer Anywhere.

Important Disclaimer
The information contained here only provides general information on the covered subject. Nothing in this publication should be regarded as constituting legal advice concerning any particular business, operational or other situations you might face. Further, the law may have changed since the first publication, and the reader is cautioned accordingly. Please seek professional advice before taking any action.

Susan Tan

Senior Legal Executive

Qualifications:

With more than 10 years of experience in the financial industry, Susan Tan, who joined us from one of the leading corporate and investment banks in Singapore, provides invaluable expertise and knowledge in corporate secretarial.

She is conversant and familiar with the local regulations and requirements for business entities in Singapore.

As a member of our team, Susan is responsible for maintaining and updating the Company’s statutory registers and records, filing all necessary documents and forms with the Accounting & Corporate Regulatory Authority (ACRA), Ad-hoc assignments such as allotment and transfer of shares, amendment of Company’s Constitution and submission of Annual Return to ACRA.

Apart from corporate secretarial work, Susan has considerable experience and expertise in compliance advisory matters, making her a valuable member of our firm.