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Wills versus Trusts

Friday 16, April 2010

Many people prefer not to think about what will happen after their death. But failure to make proper plans can leave behind a mess that has to be sorted out by family members at great expense and during a time when they are emotionally vulnerable.

Making a will is one way that individuals can put their affairs in order. Under this arrangement the executors named in the will apply for a grant of probate, take possession of the assets of the deceased and then distribute those assets according to the terms of the will. While this is a perfectly acceptable arrangement, it can result in high administration costs (often around 4% of the total value of the estate), long time delays (normally at least one year, even for a simple estate) and very often a large tax bill.

The only real alternative to a will is to set up a trust structure during lifetime. With careful planning this can eradicate delays, administration costs and taxes, since the assets under a trust avoid probate. as well as giving other benefits. For these reasons the use of trusts is increasing dramatically.

However, a trust should not replace a will. A trust can directly protect particular assets and avoid being assets being held up in probate, but a will has other functions. A will is more suited to dealing with personal property and issues of guardianship of children or for those who are not competent to take care of themselves.

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