Creating a will with a testamentary trust is an essential step for young families to consider for several reasons:
Guardian Appointment: A will allows parents to designate guardians for their minor children, ensuring they are cared for by someone they trust in case both parents pass away.
Financial Management: A testamentary trust can manage and protect assets on behalf of minor children until they reach an age where they can responsibly handle their inheritance.
Customizable Distribution: Parents can specify how and when the assets are distributed to their children. For example, rather than giving a large sum of money at age 21, the trust can stagger distributions at different ages (e.g., 25, 30, 35).
Protection from Mismanagement: A trust can prevent young beneficiaries from mismanaging their inheritance by appointing a trustee to manage and distribute the assets according to the parents’ wishes.
Income for Beneficiaries: A testamentary trust can provide a steady income stream for the beneficiaries, ensuring they have financial support over time rather than receiving a lump sum all at once.
Asset Protection: The trust can protect assets from creditors, lawsuits, and even divorce settlements that the beneficiaries might face in the future.
Estate Tax Planning: Testamentary trusts can help in estate tax planning, potentially reducing the tax burden on the estate and preserving more wealth for the beneficiaries.
Special Needs Planning: If there are children with special needs, a testamentary trust can ensure they receive the care and financial support they need without jeopardizing their eligibility for government benefits.
Blended Families: For families with children from previous relationships, a testamentary trust can ensure that all children are fairly provided for according to the parents’ wishes.
Clear Instructions: A well-drafted will with a testamentary trust provides clear instructions on how the parents’ assets should be managed and distributed, reducing the potential for family disputes.
Continuity: It ensures that there is a seamless transfer of assets and guardianship, which can provide stability and continuity for the children during a difficult time.
By setting up a will with a testamentary trust, young families can ensure that their children are cared for both personally and financially, according to their specific wishes and in a way that best supports their children’s future.
Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
Meet David Phuah, a seasoned financial adviser with over 19 years of experience in the industry. David is a certified financial planner since 2004, having completed rigorous training and continuing education requirements to earn his credentials. His expertise lies in providing comprehensive financial planning services to individuals and families, including retirement planning, investment management, estate planning, medical and health insurance.
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