When you buy a house, you should think about what will happen to it when you die. If you don't write down your intentions, your intended receiver may have to spend a lot of time and money to obtain it, or they may lose it entirely, which is why you should consider putting your house in Trust. If you're planning to put your property in a trust, you might be curious about the benefits and drawbacks.
This article seeks to help you understand the differences between establishing Trust and drafting a will, particularly regarding your property in the UAE. However, if you already have a Will, do you need Trust? Let's start with the meaning of Trust and then will discuss why having both Trust and Will is beneficial for your property.
What is the definition of Trust?
According to Article 1 of the UAE Federal Decree-Law 19 of 2020 regarding Trusts (the UAE Trusts Law), a trust is defined as:
- the transfer of a property under a Trust Instrument,
- for the benefit of the Beneficiary or to achieve a charity or special purpose, and
- It must be done following the UAE Trust Law.
If I have already written a Will. Do I Require a Trust as Well? What makes a trust different from a will?
Many individuals mistakenly believe that having a will eliminates the necessity for Trust. It isn't always the case, though. While both a will and a trust are legal papers that outline what you want to happen to your possessions when you die, there are a few essential distinctions after that.
- Your assets will be distributed according to your wishes in a legal procedure called probate if you have a will. This procedure is not only time-consuming (it might take up to a year to complete), but it is also expensive.
- A trust, however, provides instructions on how to distribute assets – including your home. It means that the involvement of the court is not necessary. These instructions and their implementation can also be kept confidential, as is not necessarily the case with a will.
- The last difference to consider is that Trusts are kept confidential. Anyone with a Will may see who gets what and for how much. When information is stored in a trust, however, none of it is accessible.
You may want to know: Everything You Must Know About Will And Related Laws In UAE
When must you think about having a Trust for your property?
A Trust may be appropriate for you if you have a significant amount of real estate assets or have particular directions (thought) on how and when you want your estate transferred to your heirs after you die. When you put your property in a trust, you're giving instructions on who can inherit your asset - or properties – when you die. In effect, you give the legal trust possession of the property. While you're alive, you can serve as the trustee of that Trust and its assets. The Trust will then pass to your chosen heir once you pass away; however, if you have more valuable assets, such as a property with a higher net worth, a trust, in addition to a will, is a better option for you.
You should know: How to solve a Will Dispute?
Law relating to Trust in the UAE
In September of 2020, the UAE Federal Decree-Law 19 of 2020 Regarding Trusts (the UAE Trusts Law) was released. The UAE Trusts Law does not apply to DIFC and ADGM trusts, the UAE's two financial free zones. It is the first statute to allow trusts in the UAE.
Advantages of a Trust
- It helps to avoid the Probate processYour heirs can escape probate with the help of a trust. Probate is the legal procedure through which a court distributes your assets to the persons named in your will. Probate may come with many expenses and delays, and if you die and your heirs need money right once, probate will make that difficult. Probate and the associated fees are typically avoided by using trusts.
- Helpful during difficult timesWills take effect only when a person dies, but a revocable trust put up during your life might benefit your family if you become ill or unable to handle your assets. Your trustee can issue distributions, pay expenses, and even file tax returns on your behalf if this occurs. You can appoint someone to handle the assets (through the Trust) ahead of time.
- It gives FlexibilityIf you form a revocable trust, you can modify the terms of the trust agreement at any time by signing a document modification. It enables you to be adaptive and flexible in the face of shifting situations in life. Perhaps you will become engaged in a charity cause that you are enthusiastic about in the future. Maybe you have a new grandchild and want to include him or her in the Trust. If that's the case, you can add them to your Trust as future beneficiaries at that time.
This post is primarily intended to give general information on placing your property in a trust. The information contained herein does not constitute any legal advice. A trust transfer is a significant choice. Someone concerned about the management of trust assets should speak with HHS Lawyers and Legal Consultants about the alternatives available and the possible repercussions of completing a trust transfer.
We can help our clients establish a trust that meets their goals while complying with all legal requirements. If you have any questions concerning the Trust's formation, please don't hesitate to contact us.