Financial Security: Why You Need a TrustAugust 18th, 2022
Do you ever think about securing your financial future or the long-term management of your assets? In an era where young people are working to create generational wealth Sana Hussein, a 27-year-old Commonwealth Correspondent from Kenya discusses the benefits of using a trust to manage your assets and generational wealth.
It is a common misconception that only wealthy people benefit from trusts. However, this financial arrangement which allows a third party or trustee to hold assets on behalf of a beneficiary is a flexible option that can be used to fulfil different needs.
Trusts allow grantors to specify to whom, when and on what terms, their assets should be made available to their beneficiaries. But isn’t that what a will does? Not exactly. A will outlines how someone wants their assets to be distributed after their death, while a trust can be activated while the grantor is alive.
Despite a will costing less to be drafted, a trust can save your estate money at the time of death as the distribution of assets in the trust will not go through probate (a legal process in which a will is reviewed to determine whether it is valid and authentic). A trust, therefore, results in faster distribution of your assets to your beneficiaries without the added costs of the probate process.
Trusts also offer a high level of privacy as they are not made public upon the grantor’s death. Additionally, the grantor can set conditions that outline how the money in the trust is to be dispersed. For example, a condition of a trust could be that a benefactor who is a minor receives the monies from the trust only after reaching a certain age or graduating from university.
Charities and institutions can also benefit from your wealth through trusts that remit funds to the desired charity for a certain period.
Another great advantage of setting up a trust is the opportunity that it provides to create a ‘life interest’. You can give a beneficiary the right to occupy a particular property for life, and then have the property passed on to another beneficiary after the death of the first beneficiary. You can also separate an asset from the income it produces and give each to different beneficiaries. For example, with a trust, one beneficiary may be entitled to getting the property itself (for example, a house) and at a later date, another beneficiary could be entitled to the rental income generated from the house.
Trusts ensure that your financial affairs are well handled, assets are efficiently managed and if you have children, their interests are protected. It is a convenient way to ensure that there is generational wealth and to maintain control over how your property is passed on.
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About Sana Hussein: I am a young professional in the legal field always yearning for adventure. My interests include hiking, camping, road trips, meditation and exploring nature. My ambition is to keep growing spiritually, professionally and mentally.