ESTATE ADMINISTRATION PROCESS

Trust

Living Trust (inter vivos)

A living trust can be created during the lifetime of the Settlor. In theory, a living trust can hold any type of asset under Trust, provided that the Trustee agrees to the type of asset to be held under a Trust. For instance, Corporate Trustees normally will not accept movable assets such as cars, jewelry, antiques or works of art into a trust. However, a Trust can be created using cash, life insurance policies, unit trusts, etc.

      The Benefits Of A Living Trust

¨   There are no legal hassles or long delays in settlement.

¨   Depending on how the Trust is designed, the Settlor's assets can be out of reach of creditor's

        claims, bankruptcy, dissolution of marriage settlement or professional negligence claims.

¨   It takes the complexity of asset management out of the incompetent hands of Beneficiaries,

        retarded or disabled heirs.

¨   It is useful for the elderly, wealthy estate owner who lacks the capacity to look after himself, or who suddenly becomes subject to a lifelong disablement.

¨   It avoids forced heirship, for example, in the case of a Muslim who will not be permitted to leave his property to anyone he wishes on his death.

¨   It preserves complete confidentiality. A non-trust property under the Probate or Administration procedure will not only give a complete list of all the properties owned by the deceased to the tax authorities, but also to creditors and to the public.

¨   It can be used to preserve special family property for future generations.

¨   It is one of the best ways of protecting minors' interests.

Living Trust (Revocable)

Revocable Living Trust can be changed or ended at any time. Such Trust is treated as an incomplete gift and does not change the tax status.

There are four benefits of revocable living trusts:

  Trustee have the time and ability to manage the property than settlor;

 Psychological benefits of giving while retaining the ability to reclaim property;

Ability to test and observe the Trustee's operation of the Trust.

 Trust becomes irrevocable upon the testator's death and passes to beneficiaries [avoid probate and publicity].

Living Trust (Irrevocable)

Irrevocable Living Trust is where property permanently placed in Trust. Settlor cannot end the Trust or reclaim property.

There are six benefits of an irrevocable living trust: -

The Trust can be used to manage property for a needy dependent 5-6.4.2 Trustee can provide

     expertise [e.g. investment and accumulations]; 5,6.4.3 Probate [at death of Settlor] is avoided;

Exempt from claims from Settlor's creditors;

Shelters assets from spousal election rights at the Settlor's death [e.g. to provide for children from

      previous marriage];

Exempt from claims by the Official Assignee under bankruptcy proceeding provided Trust was created

     after the exempted time (3-5 years)

Should your trust be revocable or irrevocable, you first need to find out from yourself, whose interest is at stake for you or whose interest are you planning to protect, your own or your beneficiaries?

If it is your own interest you wants to protect and you wants an option to take back the trust money or property during your life time due to any unforeseen personal or business emergencies,    it is then advisable that you set up a revocable trust.

On the other hand if your objective is to protect the interest of your beneficiaries no matter what happens to your personal finances or your business, then the solution for you is an irrevocable trust. It must be understood that you cannot enjoy asset protection while keeping the right to revoke your trust. It is like a fork in the road, you take one way or the other.

Testamentary Trust (a.k.a. Will Trust)

A Testamentary Trust is created under a Will and is never irrevocable until the Testator's death. Since such Trust is created under a Will, the Testamentary Trust is subject to Probate and the Trust does not receive property until the Testator's death. After the Testator's death, the property intended to be held under Trust shall be transferred to the Trustee by the executors. Testamentary Trusts are usually created to protect minors and disabled Beneficiary. Unlike a Living Trust, there is a probability that a Testamentary Trust may fail, if for instance, before his death the Testator has disposed the property intended to be included under the Trust or if the Testator died insolvent.

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