Trusts Provides Great Benefits. But Do I Really Need One?

TRUSTS PROVIDES GREAT BENEFITS. BUT DO I REALLY NEED ONE?

Setting up a trust is a popular estate planning vehicle because it is ideal for transferring assets from generation to  generation.

Not only does it allow tax-effective transfers, but it also provides some confidentiality and other benefits.

This article provides essential factors to  determine whether a family trust is right for you.

What Is A Trust?

  • A trust is a legal arrangement that allows a person (the “settlor”) to transfer property to a trustee to hold it to benefit beneficiaries.
  • A well-executed trust prevents future disputes between beneficiaries and respects the settlor’s wishes.
  • Setting up a family trust may be a good idea if you deem it necessary for your estate planning needs. 

Uses Of A Trust

1. Asset Protection
  • Individuals with a high-risk profile need to take measures to protect their personal assets from being attached to any litigation.
  • When you place your personal assets in a trust, you essentially transfer ownership of those assets to the trust.
  • This means you no longer have legal rights over the assets in question.
  • This can be helpful if you are trying to protect your assets from potential creditors or other claimants.
2. Business Continuity
  • When it comes to family businesses, placing the company’s shares in a trust can help ensure its continuance despite any potential disputes among family members or bankruptcy.
  • By taking this precautionary measure, family businesses can help safeguard their future, ensure its longevity and remain a viable option for future generations.
3. Succession Planning
  • Trusts are beneficial because they offer flexibility in choosing beneficiaries and determining when assets should be passed.
  • For example, if descendants are minors, assets can be placed in trust and passed on later when they are legally adults or  attain milestones like graduation, marriage, or having their first child.
  • This way, beneficiaries can receive assets at a time that makes sense, rather than all at once.
4. Family Dynamics
  • Family disputes and divorces are increasingly more and more common. 
  • When a party injects assets into a trust, they essentially give up their ownership rights.
  • This can benefit family members who may be susceptible to legal claims, such as those with a debt burden or facing marital challenges.
  • By owning the assets through a trust, these individuals can still reap the benefits of the assets without having to worry about directly owning them.
  • If a potential successor is a spendthrift or bad at managing money, then a trust is an ideal arrangement to distribute income and benefits periodically or progressively to that member. This ensures that the beneficiary can still receive their inheritance but is managed responsibly.

Trusts In Singapore

  • Singapore is a popular destination for establishing trusts due to its robust trust regime and attractive asset protection and succession provisions.
  • In addition, the strict client confidentiality and banking secrecy laws make Singapore the ideal trust jurisdiction for those who need a trust.

While many different types of trusts can be used for various purposes, it’s essential to understand that only some trust are suitable for some situation. You should always consult a lawyer to determine whether or not a trust is right for you and your family.

When protecting your loved ones, getting the right advice is vital! If you’re not sure whether you need to set up a trust or if you want to set up your trust, speak to us over video consultation via Lawyer AnywhereWe can discuss your needs and recommend the best solution for you.

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