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What Is Trust?
A Trust is an estate planning instrument for an Individual to ensure the total protection of asset(s) is preserved for the beneficiaries while in the safe hands of the Trustee. There are three parties involved in a Trust. 1. The settlor - person who sets up the Trust. 2. The Trustee - the person or a corporation who manage the Trust assets. 3. The beneficiary - the person who receives benefits from the Trust.
The assets commonly used to set up a trust are: cash, insurance policies, unit trust, properties, shares. The property under Trust does not belong to the Trustee personally. Though the trust property is registered in the Trustee's name, it is NEVER part of the Trustee's own properties when he dies. Only the Trust beneficiaries will be entitled to the Trust Fund NOT the Trustee's own beneficiaries. Example of Common Usages of Trust 1) Distributing Wealth to Avoid Probate Trust of this nature is useful when you have: 1. Minor children and spouse who is a homemaker or earning not as much as you 2. Special children requiring funds for medical, education and living expenses. 3. Have a 2nd Family to provide for 4. Financing children's tertiary education.
2) Protecting Wealth Protecting Against Wasteful Beneficiaries The Protector appointed will ensure there is no wastage of moneys receive under the Trust. Protector can stop disbursement of fund to undeserved beneficiaries. Against Creditors of Settlor and Beneficiaries Protector will instructs Trustee to stop the disbursement of fund when any beneficiary has become a bankrupt. Protecting Wealth Against the Settlor's Creditors When a person becomes a bankrupt, usually an investigation by the authorities is done to recover assets transferred up to 5 years prior to bankruptcy. The suspicious transfers will be nullified to recover the assets to pay the creditors. 3) Protecting Wealth Against the Beneficiaries' Creditors! This is achieved by creating a Discretionary Trust when any of the beneficiary becomes bankrupt, he will no longer be entitled to the benefit under the Trust. 4) Preserving Wealth for Your Great Grandchildren Preserving assets for your great grandchildren. 5) To cater funds for various family situations For example, education and Maintenance fund for grandchildren, nephews etc
5) Get assets protected from creditors - Irrevocable Trust When assets have been in the trust for more than 5 years. 6) Not easily contested Disgruntled family members who are not receiving anything from the trust are unable to make claims against the trust because the assets are no longer under your name. 7) Your instructions on distribution in the Trust Deed can prevent your wealth from being squandered A comparison between a Will and a Trust