Trust is an important tool in estate planning. It is a mechanism to separate the power of execution over a property from the beneficial owner of a property. Critically analyze the six advantages of trust.

(Critically analyze the Advantages of trust in detail in the following six areas)

1.      Flexibility

•       A settlor may change his/her wishes from time to time. There may be a need to add or remove beneficiaries when family or other circumstances change.

•       Wide powers and discretion are granted to the trustee to deal with matters including determination of beneficiaries’ entitlement, distribution of income and/or capital, and the making of investment decisions.

•       A well‐drafted trust document may cope with changes without the need of redrafting.

2.      Less likely to be challenged

•       Compare to Will, trust is less likely to be challenged.

•       Because trust provides high degree of flexibility to cater for changes, it is less likely to be challenged by family members. This helps maintain harmony within the family.

3.      Protection of Assets

•       A person is divorced from those assets which he/she owns on a registration basis in the public record.

•       Creditors are not able to get the money or property under the trust registered in the name of another person at the time of bankruptcy.

•       A person cannot set up a trust simply to defeat existing creditors’ claims.

•       However, it would be wise to plan against possible future claims by setting up a trust.

4.      Succession Planning

•       Assets in the estate are generally frozen on death, surviving members of the family may not have sufficient cash to maintain their living and pay for the legal costs incurred in the probate application process.

•       In contrast, since assets in a discretionary trust do not pass through the estate, probate formalities can be avoided. This ensures a smooth succession and saves considerable costs.

•       The trustee has the power to assist the beneficiaries during their minority, i.e., before they achieve the age of 18 or any age.

5.      Confidentiality

•       Although a Will is a confidential document, probate proceedings will go into the public record.

•       In contrast, there is no requirement for the registration or publication of a family trust with any public authority.

•       Trust can keep the real beneficial owner in confidence. Only the registered owner is found in the public record, and the real owner is unknown to the public.

6.      Assets Management

•       Globalization furthers the worldwide spread of individual assets, which could be better managed by a trust.

•       A trust is set up in an overseas jurisdiction so as to avoid the income being caught by the domestic tax authority.