Page 226 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Unit 12: Estate Planning

To divide property ownership among persons and provide flexibility in use of that Notes
property.

Federal estate or income tax purposes - trusts can contain provisions to reduce
federal estate or income taxes.
For charitable purposes.

Did u know? Trustees can generally be anyone the grantor wishes, including the grantor
himself. It is not uncommon to have co-trustees. One trustee could be the grantor, or a
family member, whose role is to be sure that the grantor’s personal objectives are met.
The other trustee could be a bank or other financial institution that would make the
investment decisions on behalf of the trust beneficiaries.
Three common trusts include:

Testamentary Trusts
Revocable Living Trusts
Irrevocable Trust
Globally, a lot of people are using the trust vehicle to do their estate planning. In India people
want the hard work they have put in to generate wealth should be passed on to the next generation
in an efficient manner.

What is the difference between a trust and a will?

There are three options that a person can do today. One is not care and just don’t be bothered
about the next generation and the second option is to have a will. A will is very popular in India
and then there is the trust.

Now, in a will there are certain disadvantages. First of all the will needs to be probated, it’s a
court procedure and it takes time. There are certain legal costs involved and you would require
hiring lawyers. And till the time the probate is complete, the assets are frozen and the court and
the public have access to the list of assets in the estate. Financial privacy lost. Once the assets are
to be distributed, they are split so the beneficiaries can then do whatever they want. Sell the asset
or keep it.
In the case of a trust, there is no question of probate as the ownership of the assets is passed on
to the trustees. It is then no more a part of the settler’s estate, and therefore the process is
continuous and there are no delays.

It offers enhanced confidentiality. It is not fully
confidential, but at least it is not put on the list
for everyone to see. Thirdly, the trust comes
into being when the settler is alive and the
will when the settler is dead.
The trust is continuous; it starts the moment
the settler wants it to. And the assets are not
fragmented. The settler can put conditions for
the beneficiaries. Say a tranche of money is
disbursed when the beneficiary achieves a
professional degree, another when married and
so on.

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