Trusts and Wills

Everyone has heard the terms “will” and “trust,” but not everyone knows the differences between the two.

Both are functions of estate planning that serve different purposes, and both can work together to create a complete estate plan.

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  TRUSTS AND WILLS

Trusts and Wills

    Everyone has heard the terms “will” and “trust,” but not everyone knows the differences between the two.

    Both are functions of estate planning that serve different purposes, and both can work together to create a complete estate plan.

    What is a Will

    • A will is a document that directs who will receive the possession at the death of the testator (person who’s will it is) and it appoints a legal representative called the executor to carry out the wishes of the testator.
    • A will covers any property, or a share of that property that is in the testator name when he dies. It does not cover property held in a trust.
    • A will passes through probate. That means that court controls the administration of the will and ensures the will is valid and the property gets distributed the way the deceased wanted. The court also honours claimants to a deceased’s will.
    • A will becomes part of the public record, a trust can remain private.

    What is a Trust

    • A living trust – is a legal arrangement created to keep ownership of an individual’s assets. The person who forms the trust is called the “trust maker” or “settlor” who transfers ownership of assets into the care of another person (the “trustee”) to be administered for the benefit of another person or group of people (the “beneficiaries”).
    • An advantage of the trust over the will, is privacy, as trust can prevent the details of the assets becoming available to the public.
    • A trust can be used to begin distributing the assets that has been transferred to the trust before settlor death, at death, or after death.
    • Massively important a trust passes outside of probate, so a court does not need to supervise the process, which can save time and money. The assets can be passed immediately, after the trust is established, to the named beneficiaries.

    When Wills and Trusts Take Effect

    Wills

    • A last Will takes an effect after the death of the testator.
    • The Will can be changed right up until the time of the testator/ or “settlor” death as long as he remains mentally competent.
    • A Will can only govern the disposition of property owned by the testator at the time of his death, including interests you might have in property such as a tenancy in common.
      It cannot address assets that pass directly to a heir by contract or by operation of law such as life insurance policies or joint tenancies with rights of survivorship.
    • A Will does nothing to plan for mental disability because it doesn’t go into effect until the testator dies. Heirs would have to approach the court to ask a conservator or guardian be appointed to handle the settlor affairs if he were to become mentally incapacitated before that time. This can be both costly and stressful.

    Trusts

    • Trusts Provide for Life and Death.
    • A Trust goes into effect as soon as it’s signed.
    • A Trust can be changed right up until the time of the testator/ or “settlor” death as long as he remains mentally competent.
    • A Trust can govern and distribute any property that has been placed within it. The grantor transfers his assets into it after it’s formed. These can include life insurance policies, investment accounts, financial assets, company shares, property, physical treasures like art or jewellery and bank accounts.
    • Provisions for disability can be written into a living trust. The settlor can name a special trustee to take over after his death to aid the main trustees administrating the trust.
    • A trust can be set up for the educational purposes of the children. This can be a flexible or irrevocable arrangement.

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