1. What is a Trust?
A Trust is a legal arrangement, whereby Settlor transfers his assets to Trustee (normally a trust company) to hold and administer the assets for the benefit of the beneficiaries.
A Trust Deed will be executed by both the Settlor and the Trustee. The Trust Deed sets out the terms and conditions upon which the Trust Assets will be assigned to and held by the Trustee, who will administer and distribute the Trust Assets properly according to the terms of the Trust Deed, as well as the objectives and intentions (Letter of Wishes) laid down by the Settlor.
2. What is the benefit of setting up a Trust?
Succession planning
Trust enables succession planning for family assets and secure business succession.
Asset Protection
A properly structured Trust will protect your family’s wealth from creditors and other claimants.
Control over distribution after your lifetime
A trust ensures that the trust assets will be distributed to beneficiaries in reference to your wishes.
Confidentiality
Both the identity of Beneficiaries and you as Settlor are kept in a strictly confidential manner.
Protect the Minors
A trust is an effective tool to take care of your loved ones’ medical, education and maintenance needs and protect their interests if they may be too young or not capable to manage their own affairs.
3. Do I need a Trust if I already have a will?
The main differences between a Trust and a will are:
|
Will |
Trust |
Probate process |
Lengthy and expensive probate court proceedings |
No need to have probate |
Confidentiality |
A will is a public document |
Confidential arrangement, distribution plan is private |
Asset Distribution |
One-off distribution |
Tailor-made distribution by time and conditions by Settlor, to avoid spendthrift |
4. Is there any minimum requirement of assets size to set up a trust?
From legal perspective, there is no minimum assets requirement to set up a trust. We don’t require any minimum assets requirement to set up a trust either, although the client should consider the annual administration fee after the trust’s set up.
5. What is the cost to set up a Trust?
There are two main components: Trust setup fee (one-off) and annual administration fee.
6. Will a Trust expire?
Hong Kong Trust Law has perpetual period.
7. Will I lose control of my assets after I set up the Trust?
During your lifetime, a settlor can make suggestions on how the trust assets can be distributed by requesting the Trustee’s consent. After lifetime, Trustee will administer the trust assets according to the letter of wishes. A Trust can be structured to reserve the investment power to the settlor or an investment manager to manage the trust assets.
8. When Trust Company goes bust, will I lose my assets?
Trust assets are properly safeguarded and segregated from Trustee Company’s own assets. When Trustee Company bankrupted, Trust Company is not allowed to utilize assets in a trust to solve its own financial problems since trust asset is fully independent. Therefore trust asset will not be affected by Trustee Company failure and could be transferred to another trustee.
9. Do I need to inject all my personal assets into the Trust?
You don’t need inject the assets at one-go, you can do it step by step accordingly to your personal circumstance.
10. Who should set up trust?
You may want to can set up trust for your children and the trust funds can be set aside for their future education and ongoing expenses, the trust can also protect family assets from any unforeseen circumstance, such as creditor or failed marriage. Trust can also take care of minors and elderly according to the settlor’s wishes.