At times, people in Singapore are confused about trusts vs wills. Many people think they are the same, but there are differences between both. Let us look at the main differences between Trust and Will.
A trust is a fiduciary provision that allows a trustee to hold assets for a beneficiary (or beneficiaries). The beneficiary is entitled to an equitable share of the assets held. The trustee is in charge of managing the trust assets on behalf of the beneficiaries. For instance, a trustee may build wealth with the trust fund and pay the applicable fees and taxes. Here are five examples of trust types.
- Revocable Trust:
The trustee can nullify, revoke, or renegotiate the terms of a trust. This is best if a settlor wishes to maintain ownership of his holdings in a trust. Funds held in this form of trust have estate duties applied and are therefore not guarded against financial institutions if the settlor becomes insolvent.
- Irrevocable Trust:
Assets are not subjected to reclamation in this trust. However, the assets are only shielded against lenders if the trust was made over five years before the bankruptcy.
- Asset Protection Trust:
The settlor’s assets are safeguarded against business losses or failed investments assets placed into this trust are not considered part of a settlor’s holdings. The assets are distributed upon the settlor’s death.
- Charitable Trust:
A charitable trust is not required to comply with the rules of establishing a trust, such as the certainty of object and perpetuity. It offers tax relief and exemptions. This trust type does not require beneficiaries to be specified.
- Constructive Trust:
A trust is formed by court order when it might be possible for a person who possesses an estate to reject another individual’s equitable interest in the asset. As a form of implied trust, it is not established by a settler.
A will is a legally enforceable notarial agreement that allows a testator to assign executors to administer their property and distribute it to beneficiaries of their choice. The type of will you might use depends on the circumstances and the long-term goals you want for your beneficiaries. Here are five common types of wills.
- Simple Will:
Just because they are simple, does not mean they are not effective. A Simple Will allows you to do all of your basic will planning, such as designating a guardian for minors, or and naming an executor of the Will.
- Testamentary Trust Will:
Written inside a Will, this type of Trust is distinct from others in that it is not created until after your death. Testamentary Trust Wills are helpful if you need to provide long-term care for Beneficiaries.
- Joint Wills:
Joint Wills are two person’s Wills contained within a single document. It is used when partners would like to make each other Beneficiaries if one of them dies. After this, the final Beneficiaries would be a child or children when both partners pass away.
- Living Will:
A Living Will is useful for end-of-life management and expressing your preferences for prospective healthcare. It reduces the burden on loved ones if tough decisions need to be made during this period.
- Holographic Wills:
These are manually written Wills that usually result from extreme and unforeseen events, including war and other life-threatening scenarios.
Wills and trusts are often confused in Singapore. The types listed above will help you to perform estate planning, allowing you to figure out what’s best for a secure future.