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Should I write a will or form a trust to distribute my assets

The following article was first published in the Mint newspaper on 1st November, 2022. The same was written by our Private Client team at Cyril Amarchand Mangaldas, who frequently publish their comments and opinions in the Mint. The online version of the article can be found here.

I am 76 years old and hence want to write a will. I have two houses worth 2 crore. We are living in one of the houses and the other is rented for 75,000 per month. We also booked a shop having a resale value of 1 crore. I have 1.6 crore in mutual funds and 65 lakh in shares. 

I have a wife and a daughter. I want all my assets to be given to my wife and thereafter to a trust that should decide on monthly distribution  of income from the assets to my daughter and grandson. Thereby, I want to ensure that the assets generate wealth without being misused by anyone. Please guide me on how I should go about setting up a trust.

—Name withheld on request

A trust would indeed be a good option in your case, to help ensure that your assets will go exactly as per your wishes and that the ability of anyone to challenge this would be very limited, as opposed to only using a will. Since the primary objective is to safeguard the interests of your daughter and grandson, your daughter can be made the trustee (but do consider adding one more person) and the beneficiaries should only be your daughter and grandson. You can establish a private trust today as a ‘lifetime trust’, and bequeath your estate to such trust in your will. Alternatively, you can establish a testamentary private trust through your will itself. In both cases, you would be the settlor of the trust.

We would recommend the lifetime trust option, as its preferable to set up a simple trust in your lifetime, which will enable you to control the affairs of the trust in your lifetime, and your estate can be bequeathed to such trust under the will. The other variation is that you set up the lifetime trust today itself and also complete the full transfer of your estate to the trust in your lifetime (with very limited personal assets remaining to pass under your will). Such trust can be either a determinate trust (where the entitlement of each beneficiary is clearly identified and ascertained by the settlor in the trust deed) or a discretionary trust (where the entitlement of each beneficiary is not identified or ascertained by the settlor in the trust deed). The trust deed can be drafted carefully to provide additional safeguards and flexibility to your daughter and grandson to ensure that they receive periodic distributions. Based on your other objectives, you can devise a suitable trust structure, after discussing with your attorney.