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Trusts and estates: a trust instead of a will for optimal inheritance?

9/6/2024 8:00:00 AM
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Trusts and estates are an interesting matter, and they must be addressed carefully. In case you haven't noticed, the heading of this article is followed by a question mark. Why is this? Can in fact, corporate trustee services replace a will? What is the difference between a will and a trust?


Establishing a will or a trust: estate planning and beyond

If you have read our previous articles on trusts like the differences between trusts and foundations, you probably know that corporate trustee services have many uses. Considering that the basis of a trust lies in separating ownership we can infer the structure's implications.

Separating your assets through corporate trustee services allows you to protect them. The explanation is quite simple: Since they don't belong to you, they can’t be taken away. Naturally, trust accounting, managing, and legal aspects must be considered like with any other structure.

In some cases, a trust can help you lower your tax base. Again, since you are not legally the owner you won't be receiving profit from them, hence the exemptions. This is particularly so in specific jurisdictions that offer tax benefits or that simply don't tax foreign assets or certain goods/activities.

A low-tax jurisdiction is Nevis which also happens to be an excellent destination for corporate trustee services and trust accounting. In Nevis, for example, the legislation is ultra-protective and helps preserve the assets by not recognizing foreign court rulings. 

Another use of the trust is the possibility to manage your wealth and most importantly, who uses it and when. A smart strategy against spendthrift relatives is thus put into action. But it doesn't have to go that far: you may just want to put away some money for your children to pay for their college in the future.

This is where we enter the most relevant use of trusts, at least for the topic of the present article. Let's dive into the universe of trusts and estate.


Setting up a will and trust: estate planning and control

Naturally, trusts and estates are well linked. In the same way you can decide who uses the assets held by the corporate trustee services, this can be implemented after you pass away. Understanding this is key for trust estate planning.

At this stage, it's vital to clarify that a will and a trust are two different things, and one doesn't replace the other. Where lie their differences?

A will is a document stating what will happen to your assets after you die while the trust is a much more complex structure. For starters, it is managed by a third party, that's why we call them corporate trustee services*, and it requires to establish exactly when and how the assets will be distributed (unlike a will where the matter of “when” is quite simple).


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With a complex structure also come complex matters and certain considerations like control. Transferring assets to a third party, even if it is under a safe structure, implies losing some control. With a will, you can wholly benefit from everything you own until you can't anymore for obvious reasons.


*Note: the trustee doesn’t necessarily have to be a company, and it can also be a person. 



Setting up a will and trust: why a trust is a better solution for estate planning? 

Although the trust can be more demanding during its lifetime, at the time of distribution it is more convenient. Transferring assets through a will, means transferring them through probate and this is not without legal procedures and costs. Validation and similar requirements can be lengthy and expensive, two problems that corporate trustee services solve.

Readers must be aware that one structure may overrule the other. For instance, if John Smith passes away and has a house in his name this will be transferred according to the will or local inheritance laws, independently if there's a trust or not. 

If John Smith's property is owned by his trust, then it will be transferred according to its stipulations.


Best jurisdictions for trusts and estates

We have established the advantages of the Nevis trust above. Lately, we have encountered some interesting options a bit further away. We're talking about New Zealand for corporate trustee services, a jurisdiction that may surprise you with its advantages.

When we came across the opportunity to write about this, we were pleased to find that tax advantages were part of the deal. As you can see in our featured article on New Zealand, there are benefits for foreign trusts, i.e., those trusts that involve foreign assets, beneficiaries, and settlors.


Disclaimer: this article is based on editorial research and must not be taken as financial or legal advice. Before setting up a will and trust make sure to consult with a certified professional.


Trust and estates with the best jurisdictions and Mundo

Nothing makes us happier than helping people achieve their financial goals. It is no secret that the world is becoming more complex, and its intricate scenarios can overwhelm us. This is why establishing solid and clever structures is more important than ever, and setting up a will and trust might fit right into your plan.

Protecting assets during one’s lifetime is as important as protecting them afterward. This is why trusts and estates work so well together.

At Mundo, we can help you contact reliable experts around the globe to fulfill your needs whether it is through corporate trustee services, companies, bank accounts, real estate, or migration. Don't hesitate to contact us because we're one click away.


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