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Your Trust Questions Answered

5 October 2017

I’ve heard I should set up a trust to protect the assets I leave behind for my children but I don’t think I need one right now as I don’t have any concerns – what could I do?

While having a trust is important for asset protection, tax efficiency, and estate and succession planning purposes, not everyone actually needs a trust immediately despite what you might hear on the golf course.

We have found that a significant number of trusts have been formed for people who do not really need them and who ask years later why they even have such a structure in place. These are people who generally do not have or are unlikely to have any creditor protection issues or any major relationship property concerns. And more often than not, they do not have a significant asset base outside the family home.

Notwithstanding that it might not seem necessary to establish a trust for yourself in your senior years, it’s often an important consideration to think of your children and later generations and how they might deal with any legacy they are lucky enough to eventually inherit.

If you do not have a family trust, then your Will would generally provide for your partner to inherit your estate and then your children in equal shares. However, leaving your estate to your children on a personal basis might not be the most prudent or appropriate manner having regard to the much wider range of issues which affect families today than those which might have applied to previous generations. Your children may be in business themselves, or they may have fragile marriages or relationships, or they are living overseas, or they have other personal circumstances which suggest that it might be more desirable for them to hold assets in a trust rather than inheriting personally.

To this end, we suggest that rather than your Will providing for your estate to be left to your children personally in equal shares, you consider reviewing your Will and pass the assets to a trust already established for each child. Each trust would inherit the respective child’s share that they would have taken personally. These trusts, although formed and in place now, would not be ‘activated’ until you pass away.

By adopting this course of action, your children will be able to make their own decisions knowing that their inheritance is protected in a vehicle, which can also provide those advantages that come with a trust, and that are more relevant to younger people and the issues they face at their time of life.

There are many reasons as to why a trust might be right for your children; even if, it’s not right for you during your lifetime. It is well worth exploring those potential needs with your family.

Establishing an inheritance trust for each of your children will give them the choice as to how they deal with their inheritance where such a choice is restricted if they inherit in their personal names. Even if your sole asset is the family home, in any market it is an extremely valuable asset, and it will provide a significant legacy for your children. It is never an unwise decision to consider whether you should take steps to protect it.

Source: InBrief Spring 2017

InBrief Spring 2017

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