Borneo Post with the expert help of Rockwills Trustee Bhd, the leading specialist in estate planning having pioneered wills and trust 24 years ago, is publishing a regular Q&A column on estate planning. It will feature questions which readers have in mind but don’t know who to ask:
Question: I have attended a talk organised by Rockwills before, but I still do not understand that how are a will and a trust different? Can you explain more in depth to me and advise which one do I need?
Rockwills Answer: Dear reader, thanks for attending our estate planning talk. We hope you find our sharing useful in enhancing your awareness in estate planning but each has its own advantages.
Wills and trusts are both legal tools to help you achieve your estate planning objectives. Everyone with assets should have a will whereas, for a person to have a trust, there is an objective that needs to be fulfilled.
Here are some of the general characteristics of a will compared to a trust:
a. It is effective upon death even if the will is dated on the day it is signed;
b. A grant of probate must be obtained before the executor is able to legally act;
c. It covers all assets owned by you up to the point of death whether such assets are specified or not;
d. It allows you to choose who would receive your assets.
A trust has different characteristics:
a. It is only effective immediately on the date it is signed i.e. during your lifetime, rather than upon death;
b. A grant of probate or any court order is not needed in the case of a Trust before the trustee acts, unlike for a will;
c. It covers only assets that have been stated in the trust, rather than all assets;
d. Assets stated in the trust must be transferred to the trustee during your lifetime where it will avoid the trustee having to obtain the grant of probate or court order, unlike for a will;
e. It allows you to choose who would receive your assets while you are alive with conditions that you determine trust is commonly created when you have minor children or aged parents or special needs children to ensure that they have access to funds quickly when you pass on or in a coma or no longer have mental capacity.
You can also have a trust to protect your assets in the event of bankruptcy (but subject to the Insolvency Act 1967) as well as a trust for yourself to pay for your daily expenses, nursing care and medical expenses in the event of disability, loss of mental capacity due to senility or some other illness.
In summary, it is safe to say that everyone needs a will but not everyone needs a trust. It all depends on your circumstances.
We suggest that you seek a professional estate planner and explain your situation in detail and let them advise whether you need a trust or not. Sometimes, they may even be able to point out issues that you did not foresee.
Question: Recently my friend was making fun of me that I do not need to do a will as I’m still single at my age. Although it was brushed off as a joke, it has somehow triggered me to ask, is it true?
Rockwills Answer: Glad that you were able to take it as a joke, but believe it or not, a single person having assets should also have a will to give his assets to his loved ones or to charitable causes that he is passionate about.
In addition to a will, it is important for you to look into preparing a trust to take care of yourself where the trustee can use the asset you have set aside in the trust to be used to pay for your daily expenses, nursing care and medical expenses in the event of disability, loss of mental capacity due to senility or some other illness.
Consider this scenario: Billy is single, his parents have passed on long ago and he has no siblings but was fortunate enough to be surrounded by some close childhood friends.
His job requires him to travel frequently, hence he had an insurance policy that protects him from critical illnesses and total permanent disabilities. One day, he sets off for a job assignment that requires him to travel on the road.
Tragically, he met an accident that almost took his life. Though he survived, he was in a coma and was on life support. Doctors were not able to say when he will wake up. His close friend was informed of his condition and paid the medical cost but it was only for a few months.
When Billy’s close friend could no longer afford the medical bills, he turned to Billy’s insurance agent to see if Billy’s insurance could be used to pay for the medical expenses. Billy’s insurance did provide cover on comatose but the proceeds could only be paid to Billy’s bank account which his friend would have no access to.
This Q&A Column in published as a joint public service and educational initiative with Rockwills Trustee Bhd. Please email your questions related to Estate Planning to [email protected] or Rockwills’ Training & Business Development Senior Manager Sam Chan ([email protected]).
