Question:
Hi, my name is Jason. I’m a single father to Harry, my 5-year old son. As I write, I have some savings, liquid investments, EPF, a house and life insurance policies. I wish to leave my estates to Harry but he is still a minor. Thus, my question is – ‘Is it a good idea to appoint Jacob, my elder brother to be the trustee of my estates so that he can use it to take care of Harry?’
Answer:
For a start, a trustee is entrusted to safeguard, manage and distribute estates in accordance with instructions set up by an individual to fulfil his purposes. Here, Jason intends to appoint Jacob as his trustee so that Jacob could use his estates to take care of Harry if Jason passes on prematurely. Understandably, Jacob will be chosen for he is Jason’s brother, a family member whom he trusts. Thus, this leads us to our next question, which is:
Will Jacob fulfil his role as a trustee candidly if Jason passes on?
Let’s examine. In this article, I’ll share 3 key challenges that Jacob will face as an appointed trustee to Jason’s estates. Out of which, we’ll find out if Jacob would be an ideal person to be a trustee of Jason’s estates or otherwise:
Challenge 1: Continuity
If Jason passes on prematurely, his estates will be passed on to Jacob. Jacob will be tasked to keep the estates, use a portion of it for Harry’s living expenses and finally, distribute the remaining estates to Harry when he reaches 18. As such, if Harry is 5 years old upon Jason’s passing, Jacob’s appointment to be the trustee shall be for 13 years. Jacob would need to be alive and of sound mind in the 13- year period to act as the trustee of Jason’s estates.
But what if Jacob passes on before Harry hits 18?
Will Jason’s estates entrusted to him be part of Jacob’s estates instead? Could it be possible for Jacob to not write himself a will? Or, what if Jacob wrote himself a will but did not include Harry as a beneficiary? Could Jason’s estates be falling into the hands of other people such as Jacob’s wife, children, … etc? Yikes!
This means, if Jacob is alive and capable, Harry should be fine. Otherwise, it will be a complicated situation for anyone associated with both Jacob and Harry.
Challenge 2: Reliability
Let’s say, Jacob himself is also married with kids. He received Jason’s assets and has Harry living under his household. Is it possible for Jacob to take some of the estates entrusted to him to spend it on his own wife and kids? Of course, not all the time we’ll find that estates are being squandered due to lavish spendings or failed ventures in business or investments. But, could there be situations where Jacob is forced to use the estates entrusted to him for other purposes such as:
a. Pay medical bills for a relative (may or may not be related to Harry)?
b. Pursue or Defend a lawsuit?
As such, it is possible for Jacob to use Jason’s estates on other purposes than to take care of Harry and Harry couldn’t do much about it.
Challenge 3: Perpetual Willingness
It is possible for Jacob to reject Jason’s appointment to be his trustee. There are many reasons for it and they may include:
a. Jacob and / or his wife is / are not fond of Harry.
b. Jacob has a demanding career and thus, has no time to take care of Harry.
c. Harry could be a child with disability and thus, needing professional care.
and the list goes on.
Also, Jacob could have a change of heart in the due course of exercising his role of Jason’s trustee. Normally, this arises when Jacob agreed to be Jason’s trustee without having the full knowledge of its roles and responsibilities. Hence, Jacob may become overwhelmed by his duties, thus, wishes to relinquish his position as the trustee of Jason’s estates.
Clearly, trusting a family member to be the trustee of your estates is not a well- thought idea for it has many flaws which could lead to many complications and ultimately, not benefitting your intended beneficiaries. In other words, it is very possible for Harry to not fully enjoy Jason’s estates if Jacob is to assume his role as the trustee to Jason’s estates.
Who Then Shall Jason Appoint to be the Trustee of His Estates?
So, let’s say, Jason wishes to:
a. Appoint Harry to be the sole primary beneficiary of his estates.
b. Distribute a fixed portion of his monies to Harry for his living expenses.
c. Set aside a certain amount only to be distributed to pay for his college fees.
d. Holds the bulk of his estates (his house) until Harry hits a certain age.
e. Determines how his estates should be managed when they are held in trust.
Then, it is ideal for Jason to appoint a corporate trustee like Rockwills to be the trustee of his estates. This is because a corporate trustee:
a. Will not fall ill, comatose, or pass on like a human being.
b. Will act based on Jason’s wishes in accordance with his trust deed.
c. Is creditor-proof and less likely to not go bust or bankrupt.
d. Has the manpower and experiences to carry out its duties as a trustee.
e. Protects Jason’s estates if the corporate trustee goes bankrupt as they’re put in a separate trust account for administrative purposes.
Hence, appointing a corporate trustee is more reliable than to appoint a human being or a trusted family member to be the trustee of your estates. If presently, you wish to take care of your dependents by setting up a trust which allows you to have a say in what, when, how much, who, and what conditions to distribute your estates, you may book yourself a 30-minute free consultation session with our professional estate planning consultant by filling up the details below:
