What is a Trust?

A trust is created upon the transfer of assets (“the trust property”) by the settlor to a person (“the trustee”) on the basis that the trustee shall hold the assets for the benefit of other people (“the beneficiaries”).

The trustee is now the legal owner of the assets and has a fiduciary obligation to act in the best interests of the beneficiaries.

The settlor can settle most types of property into the trust, although there are exceptions such as HDB flats and CPF funds, amongst others. The trustee has management control of the trust property but it is the beneficiaries who are entitled to use and enjoy it.

There are two forms a trust can take. A fixed trust is one where the settlor has already allocated the proportions of benefits each beneficiary gets, with no discretion available to the trustee, while a discretionary trust is one where the trustee is granted the power to exercise discretion with respect to which beneficiaries benefit under the trust and the amount they get.

The benefits of a trust arrangement over a will are listed below.

Avoidance of Probate

Probate is the name given to the court document which certifies the authenticity and validity of your will and confirms the powers and authority of your appointed executors to administer your estate. It is compulsory to produce this document to be able to sell and transfer the deceased’s assets. This can be burdensome and inconvenient as many assets will be frozen pending the completion of the process.

However, in a trust arrangement, in the event of the settlor’s death, the assets settled into a trust will not form part of the deceased’s estate. Hence probate is not required on these assets and disputes over the assets can be avoided.

Protection of Assets

A trust is a useful tool to protect your assets and preserve them for the use and benefit of future generations. As the ownership of the trust assets is with the trustee and not with the settlor, a trust structure can protect a settlor’s assets from the grasp of the settlor’s creditors. However, if you are made bankrupt within 5 years after transferring assets to a trust, your creditors will be easily able to unwind the trust and claim the assets toward satisfaction of the sums due to them.

Family wealth planning

If there is a need to provide for financially irresponsible family members, a trust may be particularly useful. The beneficiary’s interest can be made terminable on the occurrence of a certain event, such as the beneficiary’s insolvency, at the trustee’s discretion.

Whether or not a trust or a will is more suitable for you depends on your individual concerns. We will be happy to sit down and discuss your options with you. Do drop us a message here.

May 15, 2017September 21, 2017

Different Types of Wills

While I have gone through the reasons on “Why should I make a Will”, this article will introduce the different types of wills available:

Standard/Simple Wills

A standard will details the wishes of the testator (the person writing the will) regarding asset distribution upon the testator’s death. Generally, standard wills may be revoked or altered at any time prior to one’s death.

However, please note that the marriage of a testator who has made a will prior to his marriage will automatically render the will invalid and the testator will have to draft up a new will.

Mutual Wills

Mutual wills are usually drafted by married couples because they are founded on the agreement of both parties in the marriage that the surviving party will not change his or her will after the other dies. Mutual wills are therefore an exception to the law that wills can always be revoked. The agreement can be made orally or in writing on a separate document.

For a mutual will to be valid, both parties must demonstrate clear intent to create the same will, agree to the same distribution of their mutual assets, and agree not to revoke the wills.

The agreement will typically provide that:

each of the parties will leave their property to mutually agreed beneficiaries;
in the course of their joint lifetimes, neither party will revoke or amend their wills in any way without the consent of the other; and
upon the death of one party, the survivor cannot revoke the will or alter it so as to change the mutually agreed beneficiaries.

It is important that the beneficiaries are informed of the existence of the agreement, as they have the right to enforce the agreement.

Such wills may prove to be most useful in blended-family situations whereby both parties want certainty that the children will not be treated differently from what was previously agreed. Mutual wills are also particularly helpful to address concerns that the surviving spouse may remarry and leave nothing to the children of the first marriage. However, the clear disadvantage of mutual wills is the fettering of discretion of both parties with respect to asset distribution.

Mirror Wills

Mirror wills are two separate wills of a typically married couple, but the terms of each will are precisely identical to the other. However, the distinguishing factor from mutual wills is that each party is free to revoke the will at any time contemplated, without informing or obtaining the consent of the other party. This provides a lot more flexibility when one party pre-deceases the other, and the surviving party wishes to change the terms of the will, as compared to a mutual will.

Living Wills

A living will is known as an Advanced Medical Directive in Singapore which is a written statement that you do not want the use of any life-sustaining treatment to be used to prolong your life in the event you become terminally ill and unconscious and where death is imminent. You can find out more about an AMD here.

The type of will you may wish to have drawn up depends on your individual concerns and the unique circumstances in which you are in.

If you wish to find out what is the most suitable type of will, please feel free to drop an email to wills_enquiries@incisivelaw.com

April 27, 2017

Taking Care When Drafting Your Will

Marley v Rawlings is the case where an elderly couple – Alfred and Maureen Rawlings based in England – prepared , almost identical Wills in 1999 where they each left everything to each other with a gift to their ‘adopted’ son, Terry Marley.
Mr and Mrs Rawlings had two natural sons; however, because adopted son Terry had looked after them and both their natural sons had money of their own, they wanted Terry to be the sole beneficiary of their estate worth £70k.

Invalid Will

Due to a mistake by their solicitor, Mr Rawlings signed Mrs Rawlings’ Will and vice versa.
Mrs Rawlings died in 2003 and her estate passed to her husband with no-one noticing the mistake. But, when Mr Rawlings died three years later, his natural sons spotted the mistake and they challenged its validity. They argued that because of this mistake , the will was invalid and therefore Terry should not be entitled to receive the 70k. ( if the will was recognised as invalid , then under normal ‘rules of succession’, they would inherit everything)

The ‘Clerical’ Error

The natural brothers and stepson Terry all went to court to dispute this and the Supreme Court ruled in favour of Terry. The arguments revolved around whether this was a ‘clerical error.’ Under the existing law ( s.20 of the Administration of Justice Act 1982 (AJA 1982)) a will could be rectified if there was a ‘clerical error” but was this really an example of a clerical error? However, the court applied a fairly liberal interpretation and ruled that it was.
The supreme court said that in the same way as resolving a contract dispute, the court should look towards other evidence which would give an indication of the intention of the parties at the time they drafted the will . Looking at the big picture, Mr and Mrs Rawlings wills were signed on the same date, by a husband and wife, and they had the same witnesses. On this basis, their intention to leave the money to Terry was not in dispute.

This decision sparked a lot of discussion at the time as it was felt that the meaning of ‘clerical error’ had been widened and this undermined the strict formalities around drafting a will which are after all in place to ensure clarity and to prevent fraud.

Although this was a case in England , you may be asking what is the relevance of this in Singapore? Well, Section 28 of the new Wills Act in Singapore also allows a court to order rectification of a will due to clerical error!

As at the date of writing this post, no cases under section 28 in Singapore have been heard but no doubt this is just a matter of time.

Conclusion

What this does mean however, is that when you draft a will, you need to be absolutely certain that your instructions are correct and correct on paper – otherwise your beneficiaries could dispute it in a court and it could be held invalid.