Estate Planning

1. Protection against creditors - This is particularly relevant if you are self-employed and/or engaged in an occupation that could result in some liability arising.

2. Splitting of income - Income derived by a Trust may be distributed to beneficiaries and taxed in their hands at whatever tax rate they are on. This can result in a significant tax saving.

3. Qualification for asset-tested subsidies and benefits - Government subsidies for long term public hospital care and private rest home care are means-tested. An elderly person on their own may only have $170,000 in assets. Elderly persons who are married, with both in residential care, may have only $170,000 in assets. For a married couple with one in residential care, the threshold is $75,000 (plus house and car, or a total asset level of $170,000). If you own a home, then unless there is a dependent relative (spouse or children) living in it, the Government may grant a subsidy but place a charge on the home and recover the subsidy when you die. What you therefore intend to leave to your family would then end up being sold and the proceeds going to the Government.

4. A separate entity to leave things to - Assets may be left to a trust in a Will, which may be preferable to leaving such assets to children (particularly if children are not skilled in handling assets or their relationships are unstable).

5. Savings on Estate Administration - Assets transfered to a trust before death do not form part of your personal estate, thereby enabling cost savings and less administration on your death. Secondly, if death (estate) duties are ever brought back, assets in a trust would not form part of your dutiable estate. Thirdly, assets held by a Trust are protected from family protection claims (contesting a Will).

6. Intact Succession - By transfering assets (for example, your buisness, farm or proprietary rights ) to a Trust, they can be transferred intact to your successors, who can become trustees of the Trust and control and benefit from such assets.

7. A Hedge Against Relationship Breakup - Assets in a Trust are protected from possible relationship property (formerly called matrimonial property) claims against family members. The only exception is where the assets have been put into a trust as a deliberate attempt to disentitle a partner from obtaining their share of relationship property. In such case, the Courts can interfere with trust assets.

8. Asset Management - A Trust is a useful vehicle for managing the assets of an elderly or sick relative who cannot manage their own assets.

A properly structured estate plan can avoid these pitfalls, and it is better to at sooner rather than later.