It is really common to see in real life that no matter rich or poor people, they contend for family property. Some of them even go to court for fighting who is the winner. In fact, when wealth allocation planning is done well in advance, many disputes could have been avoided. Testamentary trust is a widely used method of wealth allocation management. It refers a trust established through legal acts such as a will, which is also known as post-mortem trust. Normally, the client makes a will to explain that the property will be transferred to the trustee after his death, and the trustee will manage, use and dispose of the estate in accordance with the will.
Compared with the traditional will, testamentary trust has many advantages:
1.Trustees often have professional wealth management capabilities. Under their management, the inheritance is more likely to achieve value preservation or even appreciation, which is helpful for the inheritance and continuation of family wealth;
2.If the inheritor is a minor or a person who does not have full capacity for civil conduct, the inheritance can be prevented from being improperly controlled and used by others through a will trust. Hence, It can ensure the interest of the heir;
3.Testamentary trust can set flexible distribution conditions according to the actual situation, so as to avoid wasted and squandering the property by the heirs;
4.The testamentary trust can evade relevant taxes to a certain extent, which is also an important reason why testamentary trusts are widely used in Europe, United States and other regions.
However, a testamentary trust is not fully perfect, and there are some potential risks in its execution. Regarding the supervision of the execution of testamentary trust, in jurisdictions such as the United States, trusts need to be subject to the verification and continuous supervision of the probate court, and the supervision fees need to be paid to the court, In addition, the world is unpredictable, no one can predict the future. During the execution of the trust, the purpose and plan of the settlor may “conflict” the wishes of the beneficiary. The testamentary trust cannot follow the settlor’s arrangements or constraints, and there is a risk of change and termination.
Although the testamentary trust is not perfect, the advantages of it are very obvious. It is worth mentioning that, unlike other trusts, a testamentary trust is not exclusive to the wealthy. It is a civil trust and is a property disposal tool that ordinary people can use. In recent decades, family heritage disputes such as Sun Ma Sze Tsang and Law Ting Pong have been continuously staged, which is shocking. In short, heritage planning should be carried out as soon as possible to maintain the long-term unity and harmony of the family.