Only when the settlor becomes incapacitated the co-trustees take over the trust assets and administer them as per the guidelines provided by the settlor in the trust deed. However, they would have very little role to play until the time the settlor is able to manage her own affairs.
Operationally, it is important that the settlor names co-trustees at the time of the trust formation itself. To that extent, one can say that it is a tax neutral structure. The most common form of a living trust is a revocable one, in which case the settlor need not even worry about the tax incidence as the income of the trust is clubbed back in the hands of the settlor. In case of immovable assets, however, one needs to be aware of the potential stamp duty implication. Settlor can freely move funds from the trust to herself since this does not involve any incidental cost such as tax or stamp duty in case of movable assets. The assets of this trust are also for an exclusive use of a settlor or creator of the trust during her lifetime.ĭuring the able days of the settlor, she/he takes all decisions related to this trust such as buying assets, selling, redeeming or switching them, paying for expenses or merely withdrawing funds from the trust. In a living trust, one places her own assets into a private trust, which is fully controlled by the creator of the trust. A living trust is a simple yet very effective structure in incapacitation planning, whatever be the trigger for the incapacitation. While in the recent past we have seen some encouraging legislative changes to support a medical directive in case of a mental incapacitation, it has a limited purpose and flexibility.
The pandemic has worsened this issue further. Only when one stumbles upon a situation such as the Covid pandemic - where one is not in control of one’s life and is unable to take simple yet critical actions such as payment of hospital bills - one realises the importance of incapacitation planning.īesides, in the last couple of years India, has witnessed multifold increase in mental illness cases.
We often take our ability to make decisions and execute them for granted.
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