When are trusts better than wills?

Provide continuity and liquidity

If a will goes to probate or equivalent, the settlor’s assets can be effectively frozen until the court confirms the estate trustee’s authority to deal with the assets.

But, if assets are held in a trust, funds can continue to be immediately accessible. If your client has an active business, it’s critical that any transitions go smoothly, and a trust helps ensure there won’t be any asset freezes resulting from the need for probate.

Simplify estate administration

Setting up a trust can simplify estate administration since the settlor can put everything in order prior to her death.

The settlor can also remove assets from the potential future estate and put them into the trust. This process minimizes the risk of the estate trustees’ being unable to find assets after clients die.

Protect against estate litigation

Assets put in trust while the client is alive will remain under the trustee’s control after the client dies. With a will, estate trustees gain control of assets after the client dies.

At that time, disgruntled relatives or others may challenge the will’s validity. That may be much easier than challenging a trust’s validity, especially if your client established the trust several years before she died.

Simplify transfer of foreign assets

If your client owns assets offshore, she can use a trust to transfer those assets so they won’t go through the probate process in that jurisdiction. That will save time, money and aggravation. Just make sure trusts are legal in that jurisdiction.

Read: Trusts are essential to estate planning

Definitions

Inter vivos

A trust established during one’s lifetime

Settlor

A person who settles property for beneficiaries

Margaret O’Sullivan

Tax & Estate

Margaret O’Sullivan is founder of O’Sullivan Estate Lawyers LLP.

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• Avoid probate

  If clients put property in a trust before they die, that property passes outside their estates on death. They can also use the trust to set out how that property is distributed.

  This means clients can save money by avoiding probate fees or equivalent, and preserve more privacy, since a probated will becomes a public document.

• Provide continuity and liquidity

  If a will goes to probate or equivalent, the settlor’s assets can be effectively frozen until the court confirms the estate trustee’s authority to deal with the assets.

  But, if assets are held in a trust, funds can continue to be immediately accessible. If your client has an active business, it’s critical that any transitions go smoothly, and a trust helps ensure there won’t be any asset freezes resulting from the need for probate.

• Simplify estate administration

  Setting up a trust can simplify estate administration since the settlor can put everything in order prior to her death.

  The settlor can also remove assets from the potential future estate and put them into the trust. This process minimizes the risk of the estate trustees’ being unable to find assets after clients die.

• Protect against estate litigation

  Assets put in trust while the client is alive will remain under the trustee’s control after the client dies. With a will, estate trustees gain control of assets after the client dies.

  At that time, disgruntled relatives or others may challenge the will’s validity. That may be much easier than challenging a trust’s validity, especially if your client established the trust several years before she died.

• Simplify transfer of foreign assets

  If your client owns assets offshore, she can use a trust to transfer those assets so they won’t go through the probate process in that jurisdiction. That will save time, money and aggravation. Just make sure trusts are legal in that jurisdiction.

Read: Trusts are essential to estate planning

Definitions

Inter vivos

A trust established during one’s lifetime

Settlor

A person who settles property for beneficiaries