Some people think that when they die, their assets will need to be distributed to those named in their will immediately after the date of their death. Certainly, some of those assets and other parts of the estate can be allocated in this way and handled immediately by an executor, but it may be advantageous to consider establishing a separate legal instrument, known as a trust. What are the different types of trusts available and why are they beneficial?
The Family Trust
The most popular tool in this kit and the one that can help to safeguard the legacy of the departed moving forward is the family trust. Personal assets can be protected and carried forward for the benefit of future generations with this type of vehicle. At the same time, shares can be reallocated and personal properly distributed to specific individuals.
This type of trust can be established at any time, and it can be a tax-efficient vehicle for those involved. In certain cases, rules can be applied that will exclude certain members of the family from any benefit, at the discretion of the person who manages the trust.
The definition of "family" is quite broad and can include the relatives of a partner together with their spouses.
The Testamentary Trust
It may also be possible to establish a testamentary trust that only comes into force once the person actually passes away. This is often used to provide future benefits for minors, and those assets are held in the trust until certain conditions are met. The will-maker can specify a variety of different conditions, and the beneficiary will have to comply with those before they may collect against the trust. Once again, this can be a tax-efficient way of distributing income, especially capital gains. It is often a better way of treating cash or disposable asset distribution to key family members as compared to a conventional will.
It may also be possible to set up a trust that will cover the future needs of those important to the will-maker. These could include any vulnerable family members or even a much-loved pet.
Ensuring the Correct Approach
As you may expect, there are a variety of different rules and conditions associated with this type of trust, especially from a tax perspective. This is why it is important to talk the matter through with an estate planning lawyer before taking any action. They will help you to choose the best type of will or trust in your circumstances and will then create the paperwork properly.