March.8.16‬ Personal Finance‬
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Money Matters with Nimi
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You have worked hard for your money and hopefully made every attempt to save and invest conscientiously. Naturally you want some control over what happens to your assets after you die. Whether you are a person of modest means or otherwise, you have an estate and if you are financially prepared, you will be making life easier for those you leave behind.

A living trust is a popular alternative to the traditional last will and testament which is the most basic document in any estate plan, but it is important to understand their differences, as well as the pros and cons of each, to determine which will best suit your particular circumstances. Here are some of the issues to consider as you decide on what to adopt as part of your estate plan.

Holding and managing assets

Segun Ogunbiyi owns an investment portfolio consisting of stocks and mutual funds worth about N70 million, a family home and other commercial real property, and two cars. He created a living trust and transferred all his assets into it naming his wife Bisi and their 12-year old twins, Dele and Bose, as beneficiaries. When he died, the trust property automatically passed to Bisi and the children. As they were minors the trust deed stipulated that the trustee was responsible for providing Bisi with annual income and would also pay for the children’s education up to masters level. In addition the trust would manage the twins assets until they were 30 years old after which trust assets would be distributed to the three beneficiaries equally.

A will comes into play only after your demise, whilst a living trust takes effect during your lifetime. It thus puts in place a mechanism to hold and manage your property both before and after your death, and provides how those assets, as well as any trust income are distributed thereafter. Whilst a will alone cannot hold assets, it can make a provision that any property in your estate at the time of your death automatically becomes a part of a trust. This is particularly useful where there is the need to hold and manage assets for young beneficiaries, or to protect beneficiaries with special needs. Assets that have not already been transferred to the trust at the time of death will be subject to probate unless a supplementary will has been made at the time that the trust was established.

Guardianship

A will lays down all your wishes as to who should look after your minor children in the event of your death. The guardian’s legal responsibility is to provide for their welfare. Unlike a will, a living trust cannot designate a legal guardian for minor children; you would be required to add a “pour-over will” as a supplement to the trust where such a provision can be made.

Costs

Setting up a will is much simpler and much cheaper than setting up a trust, but the probate process can become expensive depending on the size of the estate. Every day families pay out huge parts of their inheritance due to probate costs and estate taxes; you have an obligation to protect and preserve what you have spent years accumulating and a properly drafted trust can help to minimize taxes.

The set up cost for a living trust and the annual management fees can make it an expensive estate planning vehicle; indeed a trust really only makes sense where there are significant assets involved and the added cost and complexity of the arrangements make it worthwhile.

The probate process

Probate is unavoidable with a will, and can take several months and in some instances, even years to administer. Keeping assets out of probate could save your heirs much time and money. Since a living trust comes into effect as soon as it is funded, assets cannot be frozen which means that your family has immediate access to funds as needed and can avoid some of the challenges associated with probate. This applies to assts that are transferred to the trust during your lifetime.

Privacy

When a will goes through probate it becomes a public document and anyone can gain access to it and read it.  A trust protects your privacy as it is not subject to probate and thus does not become a matter of public record; this can make it more difficult for disgruntled heirs or relations or other beneficiaries from challenging the distribution of your assets and lessen the likelihood of litigation. This can be particularly important for very large estates with complicated family arrangements. A trust tends to be better equipped to deal with creditors and long lost relatives showing up to stake a claim to the assets.

Seek professional advice

A will and a living trust can work in tandem to create a seamless estate plan. It is important to seek professional advice to determine what will be the most appropriate for you. Trusts are more complex and require much greater detail to ensure that you are as precise as possible and leave no room for misinterpretation.

For some, a living trust is a very practical tool and is ideal, yet for others, it may be a waste of time and money. Whether or not one or the other is for you, will largely be determined by your personal circumstances, the type of assets you own, and the size of your estate. Whichever, you choose, you will have peace of mind knowing that all you have worked for will go to the people or causes most dear to your heart.

2 Responses to “A will or a trust; which one is for you?”

  1. Moriam Alli says:

    Thank you Mrs Nimi for the write up. I am very interested in writing a will/setting up a trust fund, to know the cost implication of both atleast.

    Although I am just 29 years old with not so much (2 lands, an insurance policy that Worth’s about 13million, pension account that is over 2million at the moment and some cash over 4 million).

    I pray to live more years on earth for sure but I would love to put everything in order for my son who is just 2years old. Do you have a firm that handles will/trust and/or can you advise on some reliable firm because one of the reason people do not pay attention to this things is because of the fear they have entrusting all they have with the wrong people that might be greedy after ones demise. Please reply my mail. I enjoy your programs with Adreronke Media.

    God bless you ma’am.

    MORIAM

  2. Moradeyo Ali says:

    Thanks Mrs Nimi for the write up. I am also interested in writing a will/setting up a trust fund.

    I am in my early 30s years old with some lands acquired, an insurance policy that Worth’s over 15million, pension account that is over 4million and a great business paln.

    I would love to put things in place for my two kids(4years and 2years). Do you have a firm that handles will/trust and/or can you advise on some reliable firm.

    Best regards,

    MORADEYO

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