Glenn Smith: Where there's a will there's a way to protect assets

Our first four articles described the history and purpose of trusts, explained the roles of the various people involved in a trust, the asset-protection characteristics of a family trust and the role of a trust for the self-employed.

Here, we look at the importance of having an updated will when forming a family trust.

Family trusts form a critical part of any sound asset-protection plan. Their key purpose is to ensure your major family assets are protected for future generations. This is done by arranging for the trust to be wealthy, while the person(s) who set it up (the settlors) become "poor".

There are some similarities between a family trust and a will. A family trust is sometimes called a "living will". This is because, like a will, it describes who can benefit from the family assets and who should not.

The difference between the two is that a family trust protects your assets while you are alive.

If the Government tries to get its hands on your assets when you enter a rest home, or creditors try to take them if your business gets into financial difficulty, your family trust will protect the assets - so long as they're freehold.

It is important that you sign a new will when your family trust is formed and there should be no contradiction between it and your trust deed.

Essentially, your will determines how you want the assets held outside your trust distributed when you die. It serves to ensure that any assets not yet transferred to the family trust are bequeathed to the family trust if you want this to happen. This includes debts owed to you by the trust.

It is also important the wills of other family members are altered if they intend to leave any of their assets to you when they die - but to your trust, not you personally - so the trust is wealthy, and you remain "poor".

* Glenn Smith is the HomebizBuzz trust and company formations expert.