SETTING UP A TRUST AND MORE

Why should I set up a trust?

A trust is a flexible instrument, which can provide an efficient solution in various circumstances:

  1. A person with a difficulty to manage his or her financial affairs - when one of the children of a family is a is having difficulties managing his or her financial affairs due to a tendency to squandering or due to any other reason, a difficulty arises for the parents who wish to avoid a situation where such child inherits a substantial amount of money after their death. A trust enables the parents in such situation to to keep the management of the funds is capable hands, as well as to control the amounts and timing of any distribution of funds to such child, even after their death.

  2. A person with a disability - A trust can be efficient in a situation where one of the children of a family has a disability, which makes him or her financially dependent on his or her parents. In some cases, the disability doesn't impact the child life expectancy, therefore an arrangement should be made in order to ensure the child's well being after the parents' death. In such circumstances, a trust can be used in order to ensure that all living expenses of that child, including medical treatments, are paid for his or her entire lifetime.

  3. Asset protection - A trust can be helpful when a person is engaged in a high-risk business, or foresees an event which may have a substantial impact on his or her assets and financial state, such as a divorce. In such cases, a trust set up properly enables such person to take out those assets from his or her "pool" of personal assets, and greatly reduce their exposure to creditors. 

  4. Incapacity and old age -  In recent years, we witness a steady increase in life expectancy, and one of the common situations characterizing the elderly is dementia, or otherwise a decrease in a person's cognitive abilities. When such a person owns or manages assets, this usually creates a great difficulty. When a trust is set up in advance, the management of the assets can continue as predetermined, without being affected from any decrease in a person's cognitive abilities.

  5. Potential inheritance disputes - Inheritance disputes often occur when the deceased doesn't leave a will, or alternatively, when there is a will, but it divides the assets among certain heirs in a manner which is presumed to be unequal or unfair. In such circumstances, legal proceedings are usually initiated, which are often long, cumbersome and costly to all involved, but most of all - they often cause irreversible damage to the relationships between the family members. When Assets are transferred to the next generation via a trust, certain mechanisms are put in place that greatly reduce the risk of a dispute, especially, when the trust is set up during the life of the settlor, and the assets are transferred to the next generation without any inheritance procedure.

  6. Assets in deafferent jurisdictions People often travel and own assets in more than one jurisdiction. In such situation, the management of assets situated in a different jurisdiction may be more complex, cumbersome and difficult. Moreover, the transfer of such assets under inheritance procedure may yield different and undesired results in each jurisdiction, especially if an asset is situated in a jurisdiction imposing forced heirship rules, which limit a person ability to decide how his or her estate is divided. A trust enables such a family better control and manage the assets, as well as to avoid the undesired results of conducing local inheritance procedures.

  7. The family business - either a enterprise or a small business, a family business has it own special characteristics. Often, the head of the family establishes the business. Afterwards and over time, other family members join the family business in various positions. The passing the baton to the next generation often has is difficulties and challenges. A trust can regulate this process, and ensure that the management rights as well as the assets of the family business remain within the family over time.  

  8. The International familyIt is a common notion to view the world as a "global village", and members of the same family can often find themselves residing in different jurisdictions, whether temporarily for school or work, or permanently. In such circumstances, a trust can facilitate the holding of assets under one structure, while taking into consideration the residency of each family member (for tax purposes as well).

  9. Special or complex desires - people are complex and different people consider different things as important. Some believe that the family assets should be preserved and be used for specific purposes only, while others believe that the preservation of a high standard of life is more important and wish to make all necessary arrangements to ensure that they maintain their standard of living during their lifetime. a trust is a flexible instrument that can be adjusted to meet different needs. 

  10. Charity and commemoration - a trust can serve as a very effective instrument in order to advance a charitable purpose, especially when it can operate after the death of the settlor as well. Accordingly, a settlor can choose specific institutions, or just set the general purpose he or she wishes to advance, and leave it with the trustee to decide on how this should be done.

Other supplementary services

Despite the great efficiency of the trust in regulating the transfer of assets to the next generation in various circumstances, it is not the only instrument that can be used for this purpose, and often use of the following instruments to create an even more comprehensive and customized arrangement - all to meet the client's needs to the greatest extent possible:

  1. Wills and inheritance - the services in this respect can be divided into two timeframes:

    • Planning: drafting of wills - a last will and testament is the most fundamental instrument to regulate the transfer of assets to the next generation, either as a supplementary arrangement to a trust, or as a stand-alone instrument.

    • Execution: probate and inheritance proceedings - inheritance and probate procedures in Israel may be long and cumbersome, especially when foreign residents are involved. Managing complex probate and inheritance procedures requires experience and special attention. 

  2. Enduring Power of Attorney - This is a special POA which enters into force when the appointor's cognitive state no longer enables him or her to manage his or her affairs independently. The greatest advantage of such POA is that it replaces a guardianship and allows the appointor to determine in advance how his or her daily life would be managed in such circumstances.

  3. Prenuptial and Joint-Life Agreements - prenuptial and joint life agreements allow spouses to determine in advance how their marital assets would be divided upon separation or death. When dealing with the transfer of assets to the next generation that form a part in the marital assets, the drafting of such agreement may be highly important.

  4. Transactions of assets - the creation of a trust requires that assets are transferred to the trustee. This often requires the carrying out of real property transactions, execution of transfers of shares, the granting of gifts, opening bank accounts for the trust, and more.

The process - a "tailor-made" solution

  1. The first step, and the most important one, is a discussion with you, the client. The purpose of this discussion is to fully understand your needs, desires and requirements. 

  2. Next, we discuss the legal instruments that best fulfill these requirements. Such instruments may be the setting up of as trust, as well as drafting a will or a an Enduring Power of Attorney. This is where you can also ask any question about these instruments and how they can meet your needs.

  3. Based on the above, a detailed plan of action is devised. Such plan relates to the legal instruments which will be implemented, how they will be used, when, etc.

  4. The plan is then executed.

MEYTAL LIBERMAN, Advocate
 
Trusts and the transfer of assets to the next generation.

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Address: 5 Ma'alot Street, Holon 5884733.

email: meytal@mliberman-law.com

Website: www.mliberman-law.com