Knowledge…Shared…Multiplies
Alfred Joseph (fictitious name) and I had a discussion recently about his father’s estate. His family structure was similar to that of Mr. Alexander in my recent article. His mother died before his father. And Alfred was the only one of his parents’ six children who resided in Grenada. After Alfred’s father got dementia, he was responsible for organizing care for him. This he did over several years. Alfred had to use his own resources to care for his father since his father did not employ any estate planning tool to provide for his care in his old age. When his father finally died, he left behind a large estate but he did not leave a will.
Suspecting the answer was no, I still asked Alfred if his father had created a lifetime trust in relation to his estate. Of course he had not. But Alfred wanted to know why I asked.
Lifetime Trust and Will
I took the opportunity to explain to Alfred that as an alternative to a will his father could have created a lifetime trust. A lifetime trust would have allowed his father to have use of his property during his life time and to provide for its distribution after he died.
Alfred was a bit surprised and told me that he thought that the only way that his father could give directions relating to distribution of his property after death was by way of a will.
While the most often used estate planning tool for distribution of assets after death is by way of will, it is not the only way. A lifetime trust can serve a similar purpose.
There are different types of lifetime trust, each with its specifics. However there are features which apply to all the various types of lifetime trust.
A lifetime trust is created by a person referred to as the settlor transferring property from his name to a trustee. The trust would be governed by the instructions given by the settlor. The instructions would say for whose benefit the property is to be used while the settlor is alive and what happens to the property after the settlor passes. A key feature of a lifetime trust is that the settlor can be a beneficiary of the trust. A lifetime trust can therefore be a device for a person to have the benefit of his assets while alive while making arrangements for its distribution after they die.
Establishing a lifetime trust can involve substantial legal and administrative costs. Additionally, there may be tax implications such as the requirement to pay property transfer tax when property is transferred to the trustee. Hence, generally, the use of a lifetime trust for estate planning purposes only makes sense for estates with substantial assets.
However for most persons the estate planning device to use for distribution of property after death is a will. A will is a written document which contains directions as to how the testator’s property is to be dealt with after their death.
Privacy
The main difference between a lifetime trust and a will, as estate planning tools, is that a will has to go through the probate process. If you build your estate plan on a will, following your death the person you name as executor must make an application to the court to be officially appointed your legal personal representative (LPR). This application process is referred to as an application for a grant of probate. This is a public process. Your will is one of the documents required to be filed in court as part of the application process. Further, once probate is granted, it must be recorded in the Deeds and Land Registry. Your will is part of the documentation that is recorded and displayed in the Registry and available to be viewed by the public.
On the other hand, if you build your estate plan on a lifetime trust, your property does not go through the probate process. Following your death, the trustee would distribute or continue to use your estate in accordance with your instructions without being required to obtain the permission or authority of the court. Nor is there any requirement to file your instructions in the Deeds and Land Registry or anywhere else. A lifetime trust therefore provides for privacy. The world does not have to know who you leave your estate for.