Living Trust
Setting Up A Living Trust
Setting Up A Living Trust - Some Trustworthy Tips
In setting up a living trust, a person called the grantor conveys the ownership of his properties to another called the trustee, for purposes of managing the same for the beneficial interest of another called the beneficiary.
Corporation as a Trustee
For some persons, setting up a living trust by using a corporation like a banking institution as a trustee, may be more appropriate. A big plus factor with respect to corporations acting as trustees is that such entities can legally exist without limit as to time, compared to a natural person, which cannot. It must be noted too that in setting up a living trust, corporate trustees are capable of giving precise and itemized records of all occurrences relating to the said trust. These services are more commonly called as "accounting". The accounting records may prove useful in the future when required by a tribunal due to a suit.
Individual as a Trustee
In setting up a living trust with a natural person, sometimes it happens that the maker of the trust is the trustee himself, in which case, the maker executes a legal instrument denominated as declaration of trust which is akin to a last will and testament. Due to the fact that the maker acts as the trustee, he or she still has the power to administer the properties.
Upon the demise of the maker, the person, whom the maker designated in the legal instrument as the next trustee, will succeed. The next trustee has the obligation of conveying the ownership of the properties under the trust to the beneficiaries as mentioned in the legal document. In most cases, this procedure will consume only a couple of weeks, without any legal counsel or judicial body to be paid. Upon the conveyance of the properties of the trust to the named, the living trust is extinguished.
South Africa
In other countries like South Africa, you could choose between setting up a living trust, a testamentary trust or a bewind trust.
Testamentary trusts are those that take effect upon the death of the testator. Once the debts of the deceased have been paid, a trust could be created in accordance with the will of the testator. Testamentary trusts are made for the purpose of administering the estate in favor of the children who are still of young age.
On the other hand, a bewind trusts are those made as trading vehicles giving the trustees with certain liabilities and tax benefits.
When setting up a living trust, especially in South Africa, you must take note that there are further variations of the living trusts, which are: vested trusts and discretionary trusts. When it comes to vested trusts, the beneficiaries will get their interest in the trust in accordance with the legal instrument executed by the maker. On the other hand, in discretionary trusts, the trustees have the authority to decide what is the extent of the benefit of each beneficiary.
Effectivity of the trust
The trust is created by executing a deed of trust (usually with the aid of a counsel who is an expert in such field). After executing the said deed, it must be recorded in the local government concerned before it produces perfect legal effects.
Securing the Estate
One of the remarkable advantages of setting up a living trust is that the properties included in the trust are beyond the reach of the creditors. By legal theory, considering that the properties included in trust do not belong to the trustee or the beneficiary, the creditors of the trustees or beneficiaries do not have legally recognizable claims on the properties held in trust. In relation to this, a common set up being adverted to is making the spouses trustees of each other with another party also acting as a trustee.