Most people are under the impression that estate planning is simply writing out a Will and the necessary trusts, should they have assets to pass down. Others believe that estate planning is only for the exceedingly wealthy. However, there’s a lot more to estate planning than just making arrangements for your assets. It’s also not something that only wealthy people have the luxury of doing. Essentially, if you own a home or another property, run a business, hold shares in a company, have possessions from family heirlooms to vehicles, and have a family to answer for. Then, you have several reasons to plan your estate.

What is a Will?

A Will is a written document expressing a deceased person's wishes, from naming guardians of minor children to bequeathing objects and cash assets to friends, relatives, or charities. A Will becomes active only after one's death.

What is a Trust?

A trust becomes effective on the day it is created, and the Settlor (i.e. the asset contributor) specifies how his assets shall be distributed. In contrast to a Will, which is only effective following death, a Trust is effective prior to and following death. In the case of irrevocable trusts, which are often created for tax purposes and cannot be altered without the consent of all beneficiaries, and revocable trusts (sometimes we call living trusts), which can be changed anytime by the Settlor.

Trust and Will have the same essential function- passing your property to your heirs after death. Legally, they do the same things. Generally, people may think trust is only for wealthy people, but the benefits that Trust can offer are far more than we can expect.

What are the differences between a Trust and a Will?

1. Probate
   Whether you have a Will or not, a probate is required from a court to administer the Deceased’s estate. In Hong Kong, the probate usually takes about 5 to 7 weeks on average. However, if the application is not simple and straightforward and/or the nature of the estate is complicated, the length of time required may be longer, especially if the person dies in some countries it is harder to obtain a death certificate. Besides, a Will may be challenged by the deceased’s family members or creditors (e.g. due to stress or mental incapacity, etc) on its validity.
   A Trust does not require the legal formalities of probate and there is less opportunity for its validity to be contested if the trust is legally set up within a certain period of time. Trust saves the hassle of a long process of probate and eliminates the potential legal and time costs.

   
   

2. Privacy
   A Will passes through probate when the property involved is solely in the name of the deceased, to ensure that the dead person’s will is actually carried out. A Will will go public due to circumstances.

   A Trust is a private record that is very attractive for those looking for privacy. Meanwhile, a trust does not pass-through probate at any time. A court does not need to oversee the process because there is already a trustee appointed to do this. Trust can always remain private on the assets and identity of one who set it and the beneficiaries who benefit from the assets.

   
   

3. Flexibility
   A Will is more like an at-one-go, where the executor distributes everything at once in accordance with the Will. One problem is that there is no rule or regulation to direct the executor, which leaves the beneficiaries with little protection if they follow the Will.
   Trust can be set up in different structures depending on the location of assets and what clients wish to achieve. Clients can decide who can benefit (i.e. who are the beneficiaries), and when and how to distribute the assets to the beneficiaries through a document called a Letter of Wishes. Clients can change their wishes anytime. Trust can maintain in legacy.

   
   

4. Consolidation of assets
   The succession to "immovable property" (e.g. flat, building, land) is governed by the law of the place where the property is located. That means a Will shall prepare in the countries where you have immovable property. You cannot put all kinds of assets in one Will.
   A Trust accepts any kind of assets into a trust, as long as the assets can be held by an offshore entity and the location of the assets allow the structure of holding. The client can consolidate all assets in one structure, easy to view and it’s secured to manage by a licenced trust company.

   
   

Trust and Will- which one is better?

Trust is recognized as the best tool for estate planning. However, whether you shall consider either setting up a Trust or Will depends on what you wish to achieve, your purpose, your domicile, the location of assets etc. For example, a trust would be a better choice if you are planning to pass assets down to a subsequent generation. Among the key benefits are privacy, asset protection, saving time and legal challenges, and asset consolidation.

No matter whether you choose a will or a trust, you should seek professional advisors' advice (tax, investment, and legal). Our team — UniTrust has extensive experience in dealing with trust issues and matters. If you need further advice on setting up a trust or on the above subjects, get in touch with us to know more.