What is a trust?

A trust is a fiduciary relationship where one party (the Settlor) gives another party (the Trustee) the legal title certain assets to hold for the benefit of a third party (the beneficiary). Trusts are often used for asset protection and/or succession planning purposes.

If I have a Will, do I still need a trust?

Wills and Trusts are two different wealth planning arrangements. A Will covers the wishes of a testator regarding the distribution of his/her estate upon his/her demise. This takes effect only upon his/her death.

A trust could be set up both before or after death. By setting up a trust during life-time (e.g. inter-vivos trust), the settlor will have full power to structure the trust in his way for his own purposes.

In short, wills and trusts are not mutually exclusive. In fact, they should go hand in hand, as it is not advisable for a settlor to transfer all of his assets into the trust during his life-time. It would be useful to leave certain assets under the settlor’s sole name and for the same to be covered under a Will for future distribution.

Is it true that only wealthy people need a trust?

As mentioned, trusts are often used for asset protection and/or succession planning purposes. While it is true that the wealthier individuals with more complex asset structure have greater needs for wealth planning, the general public could also benefit from trust arrangements.

This is especially true for families with children (whether under or above 18 years old) with special needs. While they might be able to care of their daily wellbeing, they might not equip with the ability to manage their own finances. Parents of special needs children might consider a trust structure so as to take care of their children’s financial wellbeing upon their demise.

Is it very costly to set up a trust?

There are many options with regard to trustee candidates, including lay-man trustees (e.g. a friend or a relative) or professional trustee (e.g. an accountant, a solicitor or a trust corporation). Lay-man trustee normally would not charge a fee for their appointment, but at the same time, they might not be as well-equipped to provide the required standard of services. Professional trustee would normally be well-qualified to offer quality and impartial services while charging a fee.

The usual costs for setting up a trust is the one-off set up fee to be charged by the trustee, and lawyers’ fees for the advice of the trust structure and considering the trust documents. The trustee will also charge annual fee and the amount of which depends upon the role of the trustee and the size of the assets.

A trust arrangement is a very bespoke solution. If you would like to know more, please contact our team so that we could provide advice that suits your circumstances.