There are many reasons to form a trust. A trust is a legal device that requires a settlor, the person creating the trust, to transfer assets to another person who acts as the trustee. The trustee has legal ownership but holds the assets for the benefit of beneficiaries. The beneficiaries may receive payments from the trust, such as income that trust assets earn.
Many people set up trusts to avoid problems during probate of their estates after death. Because the trustee has legal title to assets placed in trust, not the settlor, the settlor's estate will not include these assets. People who use trusts in this way will need to consider what their wills say as well. Many wills include language stating that any assets held by the settlor on death will pass into the trust. In this way, the entire estate is in the trust, often making probate of the will easier or unnecessary. This saves the settlor's estate and heirs money and time.
Trusts allow settlors to specify exactly how portions of their assets should be distributed, either during their lifetimes or after death. A distribution from the trust to beneficiaries might come with a condition, such as each beneficiary finishing university. The settlor might decide that portions of the trust are distributed at specific points in time, such as when the beneficiaries reach a certain age or on the death of the settlor.
Trusts are useful to save assets for a good cause or keep assets from someone you do not want to have them. For example, you might want to benefit a charity, prevent your estate from going to greedy relatives, or help a minor child save for the future. Trusts also have some tax advantages and can be useful for people who hold assets in several jurisdictions.
Some people view trusts as a way to avoid liability in litigation or to “hide” assets. While trusts may make it more difficult for creditors to find the assets, they may still be able to recover them depending on the type of trust. Anyone considering setting up a trust should consult a qualified attorney.
To find out more about trusts and inheritance law, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.