What is a trust, and why is one necessary?


A trust is a legal arrangement in which property or assets are held by one party for the benefit of another party. People often use trusts for estate planning to ensure that assets are distributed according to the settlor’s wishes.

There are several ways you can set up a trust, but arguably one of the most straightforward ways is through contacting a wealth manager at a regulated and reputable financial institution, such as Saxo Bank.

A trust can help to protect your assets from creditors

A trust may be a good option if you are concerned about your assets being seized by creditors. When you open a trust, you transfer ownership of your assets to the trustee. They then hold and manage the assets for the benefit of the beneficiaries. If you are sued or declared bankrupt, your assets will not be subject to seizure by creditors because you do not technically own them.

A trust can help to minimise estate taxes

When you die, your estate (i.e. all the property and assets that you own) will be subject to tax. If a significant portion of your estate is left to your spouse or partner, they may be able to minimise the amount of tax payable by utilising a trust.

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A trust can help to manage your assets if you become incapacitated

If you become incapacitated, you can use a trust to ensure that your assets are managed following your wishes. You can appoint a trustee to make financial decisions on your behalf and manage your assets for the benefit of your and your family.

A trust can help to provide for your family after you die

You can use a trust to ensure that your spouse, partner, and children are provided for after you die. The trustee will hold and manage the assets in the trust to benefit the beneficiaries.

A trust can help ensure that your assets are used for the intended purpose

You can use a trust to specify how you would like your assets to be used after your death. For instance, you may want to create a trust to fund your child’s education or to provide for your spouse during your death.

A trust can help to keep your affairs private

When you create a will, your estate is subject to probate (a legal process whereby the validity of a will is proved and the estate is administered). Probate is a public process, meaning anyone can access information about your estate. However, if you create a trust, your affairs will remain private as the trust does not have to go through probate.

A trust can help you control how and when your assets are distributed

If you have young children, you may want to create a trust to ensure they do not inherit your estate until a certain age (e.g. 18 or 21). It ensures that they will be financially responsible before they inherit your assets. You can also specify in the trust deed how and when the trustee should distribute the assets to the beneficiaries.

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A trust can provide flexibility in how assets are distributed

A trust provides flexibility in how assets can be distributed as you can specify different percentages or amounts for different beneficiaries. For example, you may want to leave 60% of your estate to your spouse and 40% to your children. You can also stipulate that the trustee can make discretionary distributions to beneficiaries at certain times (e.g. when they finish school or get married).

You can use a trust to benefit charities

If you want to leave a charitable donation in your will, you can specify that the trustee donates to the charity of your choice after you die.

Trusts can be used for a variety of purposes

The above reasons are just some of how trusts can be used. Trusts can also be used for asset protection, estate planning, tax minimisation, and other purposes. You should speak to a solicitor to determine if a trust is right for you.

In conclusion

Trusts are a versatile legal tool that you can use for various purposes. A trust may be the right solution if you want to protect your assets or minimise your tax liability. Speak to a solicitor to learn more about how trusts can benefit you and your family.

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