Why would people do that, one might ask. Why not just transfer the assets to the beneficiaries. direct? In fact, there are quite a few benefi ts in using a trust. The fi rst one is that the properties held by the trustee (“the Trust Assets”) are not owned by the beneficiaries, although they are entitled to benefit from the Trust Assets. This subtle difference might look obscure but is actually very signifi cant. As the beneficiaries. do not have the legal title to the Trust Assets, they cannot deal with the Trust Assets as they see fit, and they cannot sell the Trust Assets without the consent of the trustee. If the settlor is minded to keep the Trust Assets intact to benefit C, D, E and their off-springs in the future, holding them on trust will give the settlor the assurance that they will not be sold off by the beneficiaries. Similarly, if Mr. A would like to leave a sizeable amount of cash to C, D, E and their off-springs and does not want them to squander the money as soon as they get their hands on it, Mr. A might well settle the money into a trust for the benefi t of C, D and E and their off-springs. The trustee will see to it that the money is distributed to C, D and E appropriately and in accordance with the wish of Mr. A. Although C, D and E are the beneficiaries., they will not have any say in how the Trust Assets are distributed to them. They may make suggestions to the trustee, but it is up to the trustee to decide how the Trust Assets are utilized for the purpose of the trust.

Another benefit which arises from the trust is that the Trust Assets are safe from creditors of both the trustee and the beneficiaries. Suppose C goes bankrupt, naturally the creditors of C will want to get whatever assets C has to satisfy the amount owed by C to them. And they will have a right to do so in law. However, as the legal title of the Trust Assets does not belong to C, in other words, the Trust Assets are NOT C’s assets, C’s creditors will have no right to demand the trustee to pass over the Trust Assets to them. What if it is the trustee who goes bankrupt? As the Trust Assets are held in trust for the beneficiaries., the trustee’s creditors will not have a claim over them. The trustee most likely cannot be a trustee anymore because of his bankruptcy, and so he will have to transfer the Trust Assets to another person to hold on trust for the beneficiaries..

I have mentioned above that the trustee is not obliged to follow any instructions from the beneficiaries. on how the Trust Assets are to be utilized. The beneficiaries.’ wishes will be taken into account in the trustee’s consideration, but the decisions are always the trustee’s. Apart from the beneficiaries., the settlor can also leave with the trustee a list of his wishes for the trustee’s consideration. Trustees will usually take the settlor’s wishes very seriously ands will seldom do anything which may frustrate them. In the event where there is a confl ict between the wishes of the settlor and the beneficiaries., normally the trustee would give more weight to the settlor’s wishes. A settlor, who has some wishes which he strongly feels that the trustee should follow and that those wishes will remain unchanged in the life time of the trust, may even choose to incorporate those wishes in the document which creates the trust. In such case it is almost certain that the trustee will follow these wishes to their letters. The only problem with such an arrangement is whether the wishes so stated are flexible enough to cater for changes in circumstances decades in the future. (To be continued.)