Estate planning tools are used to determine how your assets will be managed and distributed after your passing. Two of the commonly known estate planning tools in Singapore are will and trust. While you may often hear these two words used one after another, you should know that they are both different estate planning tools. Let’s find out more…
Wills and trusts: What are they?
A will is a legally binding document that helps you with the management and distribution of your assets after your passing. It allows you to state in certain terms how and to whom you wish to distribute your assets. Without a will, your assets will be distributed following Singapore’s intestacy laws (or for Muslims, Islamic inheritance law). When that happens, you will have no say as to how your assets will be managed or distributed. For more information about wills, read our previous article here.
A trust is a legal arrangement that serves to protect family assets by appointing a trustee to administer and manage assets for the benefit of the beneficiaries. For settlors whose assets might be distributed to beneficiaries that are too young to get substantial inheritances or beneficiaries who are spendthrifts or vulnerable, a trust allows for the distribution of assets once the beneficiary has reached a certain age or maturity. The trustee has a statutory obligation to act in the best interests of the beneficiaries. To safeguard the trust and ensure that the trustee does not abuse his or her powers, you can appoint a protector.
The difference between a will and a trust
1) The time it goes into effect
While a will can only take effect after you, the testator, has passed away, a trust takes effect immediately after creation. However, both are open to revisions or amendments until the day of your passing or if you are still mentally capable.
2) The jurisdiction of the estate it covers
A will only covers properties that are in your name as at the time of your passing while a trust only covers properties that are transferred into the trust account.
3) Privacy and probate
A will cannot remain private and must go through probate. This means the court will have to oversee the whole process to ensure the validity and execution of the asset distribution. A trust, on the other hand, can remain private and can be carried out outside of probate. In this case, the court does not have to supervise the asset distribution process.
Which one is for you?
A will allows you to plan for life after death—you can appoint a guardian for your children, decide how you want your assets to be distributed, and even plan how you want your funeral to be held. Meanwhile, a trust can protect the interests of young or vulnerable beneficiaries, pass wealth from one generation to the next, and protect assets intended for beneficiaries in the event of divorce legal proceedings.
You can have either a will or a trust, but you can also get both. While a trust helps to streamline the asset distribution process, if you have minor children, you may want to name a guardian to take care of them via a will. Whether you choose to have only a will or only a trust depends on you. But it is extremely important to fully understand the benefits of both estate planning tools to make an informed decision.
These tools greatly help in ensuring that the well-being of your children and loved ones are taken care of. But before you make any major decisions, it is recommended that you consult with a professional such as us. Do not wait until the last minute to settle your affairs and find out which legal document is for you when you get in touch with us now. Learn more about will writing and get the ideal probate solutions for you at Probate Enterprise.