QUESTION: I am a 38-year-old male, married, and the father of two. I am the sole owner of my house. I have written down how I want my assets to be distributed after I die and my wife is fully aware of my wishes.

I am not confident that everything is in order. I want to make sure that, when I die, my assets will go to my beloved family in the exact way I have determined. What do I need to do to ensure my wishes are carried out?

PFA: In my last column, I recommended that you make a will as one means of taking care of your estate planning needs. There are, however, several other tools.

A trust is one such tool. It is a legal arrangement that allows for real or personal property to be held by a person or an institution - the trustee - for the benefit of a specific person, group of persons, or an organisation - the beneficiary.

trust document

To create a trust, execute a trust document that says you are opening a trust to hold property for the benefit of yourself, your family, or other beneficiary. As settlor or grantor, transfer ownership of the assets to the trustee who then assumes legal title to the trust assets.

The following assets may be transferred to a trust: money in bank accounts, money market accounts, real estate, stocks, bonds, business interest, and personal assets such as motor vehicles. A trust may be written to include property that is acquired after it has been set up.

There are two basic types of trusts: a living or inter vivos trust and a testamentary trust.

A living trust is one that operates during the life of the settlor.

There are two types of living trusts.

A revocable trust which gives the grantor the ability to revoke or cancel the terms of the trust, the trustee, or trust property at any time after it commences.

The revocable trust gives the grantor the right to use, enjoy or manage trust property during his life time. It is a way to name a person to manage the grantor's affairs in the event of incapacity.

An irrevocable trust permanently removes the right of the grantor to remove assets from the trust or make other changes after the trust is created.

A living trust has several advantages: the settlor may be able to get the income that the trust property yields while the trustee manages it, it protects the privacy of the grantor since no public record of the trust is kept, and it is easy to create and change.

Disadvantages include: the costs of transferring assets to the trust and of registering and managing it, the grantor's loss of control of trust assets in an irrevocable trust, the risk of assets going to persons the settlor may not wish to benefit from the trust due to broken relationships, because a trust is not automatically broken.

A testamentary trust comes into effect only after the death of the settlor and the transfer of assets to the trustee.

A trustee may be a relative, loyal friend, the settlor (for living trusts), or a corporation. Because the trustee is required to manage trust assets and make distributions to beneficiaries, care should be taken to select someone who is prepared to spend the time required to attend to the business of the trust and who has knowledge of the investment process and of statutory returns, good management skills, and the ability to follow instructions.

young children

Trusts are suitable for parents who have young children whose education, health-care and living expenses need to be provided for, people with beneficiaries who lack financial experience, have special needs, or cannot be trusted with money, and persons whose property is hard to divide or who foresee potential family problems over the estate.

Amend a trust in writing explaining the changes and specifying additions or deletions. Revoke a trust in writing. In both cases, sign it and date it. If a new trust is being created to replace another, state at the beginning that it supersedes the previous trust making reference to its date and that it was signed by you.

Joint ownership is another estate planning tool.

This can be used for bank accounts, investments and personal assets. In the event of the death of one part-owner, the share of the deceased passes to the survivor or survivors who are required to pay transfer tax of seven and one half percent of the value of the deceased's portion of the property if it is land, building, or stock.

This does not apply, though, if the property was the principal residence of the deceased owned jointly with certain specified family members.

This approach saves costs associated with the settling of an estate but may prove risky if the beneficiary is not trustworthy.

Outright gifts may also be used to transfer assets to beneficiaries.

Oran A. Hall is principal author of 'The Handbook of Personal Financial Planning'. For free counsel on money management, email: finviser.jm@gmail.com