Discretionary Living Trusts A legacy for generations

Written by Trust Specialist, Mervin Messias, it is the culmination of knowledge and expertise that has been acquired over many years’ study and practice of Trust law.

The author recommends the use of Trusts as part of estate planning because they provide solutions to many potentially complicated problems related to asset protection, succession planning, and disability protection. Many little-known benefits of Trusts are revealed to help protect your hard-earned wealth for generations to come. A Trust circumvents the whole process of winding up an estate, together with its potential delays, hassles and frustration.

In fact, a Trust deserves pride of place in any estate plan. It means business as usual, even after death, with no executor, executor’s fees or estate duty.

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    Marriage is a law of contract, not equity. Marriage by Ante-Nuptial contract may, or may not, include accrual. That is for each couple to decide under the direction of an impartial attorney.

    Either way, it gives each partner the opportunity to manage their own financial affairs. Many have opted to run some (or all) of their financial affairs independently of one another.

    Historically, the pooling of one’s resources in the spirit of love and ’til death’ has caused many couples to rue the day. If ever there was fodder for marital discord, it is money! That said, there is a very pragmatic solution to be found in the creation of separate discretionary living trusts. The notion that it is in poor form to talk about money is rubbish. Since money is a key dissention driver in many marriages, get it sorted and settled before you tie the knot!

    Many couples are now marrying later in life having chosen to put their careers first. Good for them. These individuals have gleaned the wisdom and maturity to make smarter decisions. We have helped many such individuals with trusts to ensure that the material wealth they have each created for themselves remains theirs. What they choose to share is entirely at their own discretion.

    Trusts are about security and respect – sharing comes from the heart. Individual discretionary living trusts protect each party and provide three key benefits: asset protection, succession planning and disability protection. The individual partners are able to make provision for one another and their children (current and future) in their separate trusts. Material wealth secured in this way means that neither party can lay claim to what the other holds in the trust should the relationship sour.

    A discretionary living trust may also be amended to accommodate such changes. These trusts also offer many other significant benefits. Parties who are already married and wish to protect their personal assets from potential plunder by creditors or each other, are also advised to create discretionary living trusts for themselves.

    However, a trust can only be created when there is nothing threatened, expected or contingent so it cannot be created as an emergency response to an impending divorce. Couples married in Community of Property pre-1984 essentially have a joint estate. Since the joint estate is comprised of both spouses’ entire pre-and-post marital assets and liabilities (regardless of which spouse acquired them), one can see the potential risks should creditors enter the picture.

    The creation of two discretionary living trusts (one each) as part of their estate plan is an opportunity to move select assets out of the joint estate and into their individual trusts. Parents of naïve youngsters blinded by the prospect of being married should also be concerned. We encourage them to suggest independent financial options for both parties. Please, get advice on marriage contracts and explore the role of discretionary living trusts as part of an estate plan if you are a couple contemplating marriage.

    Not only are these trusts a fairer option, they map the way forward more constructively. If you are considering creating these trusts, make sure to speak to an experienced Trust Specialist who can advise you on the best course of action.

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