Setting things in place for our Loved Ones – The Standby Trust
How would you like to have a plan that springs into action for life’s unexpected moments?
When we are no longer able to take care of our loved ones, having our instructions in a legal document provides clarity and smoothens the process for our loved ones.
Just like having an umbrella handy in our car or bag —you may not need it now, but it’s available for a rainy day.
A Standby Trust works the same way, quietly waiting in the background until it’s needed, making sure your loved ones are protected and your wishes are followed without any legal hassles.
What is a Standby Trust?
A Standby Trust is your safety net for the future. It stays inactive until something happens where you are unable to manage your affairs or pass away. When that time comes, the Trust “switches on”, and your chosen Trustee steps in to take care of your assets, following the instructions you’ve already put in place.
Understanding the Different Types of Trusts
There are different types of Trusts in the market so it is important to select a Trust that meets your objectives.
Trusts are tools that allow you to set up plans for your assets—like money, property, or valuable items—so they’re managed according to your wishes.
Here’s a quick overview:
Discretionary Trust:
Gives the Trustee (the person or company you choose) the flexibility to distribute your assets based on your guidelines, adapting to the needs of your beneficiaries.
Testamentary Trust:
This is part of your Will, and this Trust only comes into effect after you pass away, helping to manage and distribute your assets over time, often for the benefit of minors or dependents.
Irrevocable Trust:
Once you place assets in this trust, they can’t be changed or taken back, making it a strong option for protecting assets from creditors and reducing estate taxes.
Living Trust (Inter Vivos Trust):
Created while you’re still alive, this Trust can be revocable (allowing changes) or irrevocable (fixed and unchangeable), depending on how much control you want to retain.
Comparing the different types of Trusts above, the Standby Trust is unique because it is set up now but only activates when it’s needed— in the event of mental incapacity or passing away. Until then, you stay in control, and the Trust stays as a contingent option until required.
Why Consider a Standby Trust? The Benefits.
Here’s why a Standby Trust could be a smart choice:
-
Control and Flexibility:
You maintain control over your assets, with the Trust activating only when necessary, ensuring your wishes are respected.
-
Peace of Mind:
Knowing that your loved ones and assets are protected, no matter what happens, provides significant comfort.
-
Asset Protection:
Your assets are shielded from risks like creditors or legal issues, ensuring they’re preserved for your beneficiaries.
-
Efficient Estate Planning:
The Standby Trust simplifies the transfer of assets, bypassing the probate process and reducing the chance of family disputes.
-
Mental Incapacity Planning:
If you become unable to manage your affairs, the Trust steps in to manage your assets responsibly.
-
Support for Vulnerable Beneficiaries:
You can customise the Trust to provide ongoing support for those who might need help managing their inheritance.
-
Potential Tax Benefits:
There may be tax advantages depending on the Trust’s structure, which a professional can help you explore.
Activation of the Standby Trust
A Standby Trust remains inactive until a specific event occurs, usually your incapacitation or death. This event is defined in the Trust Deed, and upon activation, the Trustee takes over to manage and distribute your assets according to your instructions.
What are some Case Studies of Standby Trusts in Action?
Standby Trusts have proven to be invaluable in various scenarios. Here are some examples of how they have been effectively utilised:
Protecting a Family Business:
A business owner establishes a Standby Trust to ensure a smooth transition of the company to their children in the event of their incapacitation or death. This not only prevents potential disputes but also safeguards the family’s legacy and the business’s continuity.
Providing for a Child with Special Needs:
Parents set up a Standby Trust to secure their child’s future, ensuring that their financial needs are met even after the parents are no longer around. The Trust is structured to provide ongoing care and support, offering peace of mind that the child will be well cared for.
Managing Assets During an Extended Illness:
An individual diagnosed with a chronic illness establishes a Standby Trust to manage their assets should their health decline. This allows for responsible financial management without placing additional stress on the individual during a difficult time.
Safeguarding Assets from Business Risks:
An entrepreneur, concerned about the potential risks associated with their business ventures, sets up a Standby Trust to protect their personal assets. This ensures that even if the business encounters financial difficulties, the entrepreneur’s family’s financial security remains intact.
Planning for Unexpected Life Events:
A young couple, embarking on a high-risk overseas assignment, establishes a Standby Trust to secure their children’s future in case of an unexpected event. This proactive measure provides them with the confidence to pursue their career goals, knowing their family is financially protected.
Is a Standby Trust the Right Fit for Your Needs?
Deciding whether a Standby Trust is the right solution for your financial planning requires careful consideration of your unique circumstances.
Our team of Estate & Succession Practitioners at PreceptsGroup provides personalised guidance, helping you navigate the complexities of Trust planning.
Schedule a consultation with us today to explore how a Standby Trust can secure your legacy and ensure your loved ones are cared for according to your wishes.
Disclaimer: This article provides general information and should not be considered legal or financial advice. Please consult with qualified professionals for personalised guidance tailored to your specific circumstances.
