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Family Trusts: Do they really protect your assets? Do you still need a will?
By Elizabeth Wellington
Your family has its very own trust funds. Do you think that they are sufficient to protect your assets and interests? Or would a will be necessary?
Before we start on the merits of trusts and wills, it is better to get some rough idea about trust and wills. What is the definition of a trust fund? According to the legal system of common law, a trust is defined as an arrangement by which way property or assets (whether tangible or intangible) is managed by a person or persons or even organizations with the intention of helping another. A settlor (the one who creates the trust) chooses certain people (called the trustees) to look after his property or assets. The trustees have legal hold over the trust property or assets. The beneficiary or beneficiaries (usually specified by the settlor) holds equal title hold over the property or assets and would be considered the true owner. The trustees have the fiduciary duty to hold property or assets for the beneficiary's sake. They also have to administer the trust as per the terms in the trust document (signed by both the settlor and trustees) and governing local laws.
A will is a legal declaration whereby a person (called testator) names a particular person or persons to manage the estate with mention of transfer of the so-called property or assets upon the testator's death. A testamentary trust (another form of trust) can be created effectively after the testator's death based on the will.
You may have made family trusts to protect your assets or property for the sake of your beneficiaries. But, how often do you update your family trusts especially in the case of a sizeable amount of assets and property? What about the additional assets or property you accumulated after your trusts were made? In such a case, a will would definitely come in handy. The will would ensure that all assets or property not mentioned in the family trusts would be passed over to your beneficiaries. Of course, in the case of the will, your beneficiaries would still have to go through the legal process of settling the estate of a deceased person called probate.
There is an important point to take note. Your trust document does not include guardians. If you have children who are minor, it will be advisable to nominate guardians and mention them in your will. These guardians will play a vital role in the upkeep of your children. They may have to liaise with the trustees for release of funds if they are insufficient for your children's expenses.
Normally, trustees are paid a certain amount of money for their duties as trustees. Depending on the appointed trustees (professional or non-professional) and as authorized by you, trustees could also be responsible for expanding your trust monies. They might have to make wise investments for your family trusts to grow. But, the chances that the investments will go awry are low especially since hired professionals are well-versed in handling trust monies.
Professionals who are appointed as trustees have legal duties to ensure that the trust is administered properly. Trusts have been in operation for hundreds of years. The nature of trusts is to protect your assets and have been successful for many years. In addition to this, there is the "Hague Convention on the Law Applicable to Trusts and on their Recognition" which regulates the conflict of trusts and is recognized internationally.
With the exception of a provision for guardians in a will or a testamentary trust, it will not be necessary to make a will if you already have family trusts. Family trusts should be able to protect your assets effectively enough as long as you appointed the relevant trustees. Another interesting to point to note is that trusts are considered as private documents whereas wills are more public in nature.
But if you feel more secure and comfortable with a will and family trusts, then, go for both. You can make whatever additional or special provisions you want in your will!