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The 3 Aspects Of Trust

We will explore how trust significantly contribute to our overall wellbeing and success, safeguarding our assets and enriching our relationships. 

May 29, 2023

In a world saturated with complexity and unpredictability, the concept of 'trust' stands as a crucial cornerstone in our lives. Trust, at its core, represents a belief in the reliability, truth, ability, or strength of someone or something. It's about being confident that things will unfold as expected, that individuals will act as they've promised, and that the structures we've set up will operate as intended.

While trust is a broad and multifaceted concept, here we focuses on three specific applications: legal trusts, interpersonal trust, and unit trust. These areas, while distinct in their nature, are connected by the thread of trust weaving through them, forming the backbone of our personal, financial, and professional stability.

As we delve into these three types of trust, we will explore how they significantly contribute to our overall wellbeing and success, safeguarding our assets and enriching our relationships.


Legal Trust

Legal trust, the first aspect of our focus, refer to an arrangement where a person or an institution (known as the trustee) holds and manages assets for the benefit of another person or group (the beneficiaries). This legal agreement provides a safeguard for our assets, ensuring they are protected from creditors and are used wisely for the benefit of our young and vulnerable loved ones.


Importance of Trust in Asset Protection

 

Understanding the concept of legal trust is the first step towards safeguarding your assets and ensuring care for your vulnerable loved ones. A trust, in the realm of law, is a fiduciary relationship in which one party, known as the trustor, gives another party, the trustee, the right to hold and manage assets or property for the benefit of a third party, the beneficiaries. In simple terms, you (the trustor) give another person (the trustee) the responsibility to look after your assets for the benefit of others (the beneficiaries). This is not a casual arrangement; it's a legally binding obligation.


Benefits of establishing a Trust

 

Setting up a trust brings along numerous benefits. First and foremost, it offers a significant level of protection from creditors. In certain types of trusts, once the assets are transferred, they are no longer considered a part of the trustor's taxable estate. This means they're generally safe from creditors' claims against the trustor.

Second, trusts can provide considerable tax benefits. Depending on the type of trust you establish, you could potentially reduce estate or inheritance taxes, and in some cases, income taxes.

Third, trusts allow for privacy and control over your assets. Unlike the probate process, which is public, the terms of a trust and its assets remain private. You also maintain control over how and when the assets in your trust are distributed to your beneficiaries.

Trusts play a crucial role in safeguarding the futures of our vulnerable loved ones. They serve as a mechanism for providing financial support for dependents, ensuring that their needs will be met even when you're no longer around. Special Needs Trusts can be established to support family members with disabilities, providing resources for their care without compromising their eligibility for governmental assistance. Education trusts are a means to ensure that funds are set aside for the educational expenses of young family members, securing their academic future.


Steps to set up a Trust

 

Establishing a trust involves a few key steps. Begin by identifying your goals - understand why you want to set up a trust and who the beneficiaries will be. Next, you need to choose the right type of trust that aligns with your needs, whether it's a Revocable Living Trust, Irrevocable Trust, Special Needs Trust, or any other type. Selecting a trustworthy trustee is crucial, as they will have control over managing the trust assets. Then comes the process of transferring assets into the trust, an essential step to make the trust effective. Lastly, trusts should not be a 'set-and-forget' tool. Regular review and updates to your trust, especially when significant life changes occur, will ensure that the trust continues to align with your intentions and the needs of your beneficiaries.

Investing time in understanding and establishing a trust today can yield powerful protection for your assets and much-needed support for your loved ones tomorrow. Trusts are not just about preserving wealth; they are about preserving peace of mind.


Interpersonal Trust

Interpersonal trust, on the other hand, plays a vital role in our daily interactions, relationships, and connections. It's the glue that holds personal and professional relationships together, fostering deeper connections and promoting collaboration. Whether it's maintaining long-lasting friendships, nurturing family bonds, or building robust relationships with clients, trust is the foundation upon which these relationships thrive.


Importance of Trust in Interpersonal Relationships

 

While legal trusts serve as protective structures in the financial landscape, interpersonal trust is the invisible, yet indomitable, fabric that fortifies our relationships and connections. Trust, when carefully nurtured and diligently maintained, can result in better personal relationships, successful professional collaborations, and loyal client bases.

In personal relationships, trust is the solid ground upon which strong bonds are built. It creates a safe space for sharing, growth, and mutual respect. Similarly, in professional relationships, trust is vital for cooperation and teamwork, driving performance and success. When clients trust a business, they are more likely to maintain their patronage and recommend the business to others, underscoring the value of trust in cultivating client loyalty.


Elements of Trust

 

Interpersonal trust is not monolithic; it consists of several key elements. Consistency, or behaving predictably and reliably over time, allows others to feel secure in their expectations of us. Transparency is about being open and honest, even when the truth is uncomfortable. Empathy, the ability to understand and share the feelings of others, builds connection and shows others that they are seen and valued. And reliability, demonstrating that you can be counted on to deliver on promises and commitments, is crucial for establishing trust.


Steps to build Trust

 

Building trust requires a conscious effort and intentional actions. It begins with communication that is open, honest, and frequent, fostering understanding and dispelling doubts. Building credibility through expertise and a proven track record shows others that you're competent and capable. Integrity, where your actions match your words, demonstrates honesty and consistency. Respect, valuing others' opinions, privacy, and personal boundaries, shows consideration and appreciation. Lastly, fostering mutual understanding and shared goals creates a sense of common purpose and unity.

However, there may be times when trust is broken. In such instances, it's essential to understand the importance of accountability and sincere apologies. Mistakes should be acknowledged and responsibility taken. Apologizing sincerely can go a long way in healing wounds and starting the process of rebuilding trust. Repairing trust also involves making a conscious effort to not repeat the behavior that led to the breach, showing through actions over time that change has occurred, and patiently rebuilding the relationship.

Remember, trust is neither built in a day nor preserved in a vacuum. It requires nurturing, maintenance, and at times, repair. It's a journey, but one that is immensely rewarding in its ability to deepen our connections and enrich our lives.


Unit Trust

While we've discussed trusts primarily as vehicles for asset protection and care for loved ones, they also play a significant role in the realm of investments. One notable example is the Unit Trust, which offers a blend of collective investment and professional management.

A Unit Trust is an investment vehicle where investors, also known as unit holders, pool their money together into a single fund. This pooled fund is then managed by a professional fund manager who makes investment decisions on behalf of the unit holders. It is catered to individuals who wish to invest but may lack the time or expertise to manage their investments.


Benefits of Unit Trust

 

There are several benefits to investing in Unit Trust. Firstly, they provide access to a diverse range of investments, including stocks, bonds, and other assets, which individual investors might find challenging to access on their own. This diversification can help reduce investment risk. Secondly, Unit Trusts come with the benefit of professional fund management. These fund managers leverage their expertise and resources to make strategic investment decisions, saving investors the effort of monitoring the markets and making complex decisions. Finally, Unit Trusts offer flexibility, allowing investors to start investing with relatively small amounts and increase their investments as per their budget and risk tolerance.


Setting up Unit Trust

 

Setting up Unit Trust requires careful consideration of a few factors. You should start by defining your financial goals, risk tolerance, and investment horizon. These factors will guide you in choosing the right Unit Trust. Various trusts may have different investment strategies, underlying asset types, and risk levels. Once you've selected a Unit Trust that aligns with your investment profile, you can invest a certain sum of money into the trust, either as a lump sum or regular investments. Over time, you should monitor the performance of your Unit Trust and adjust your investments as needed, to stay aligned with your financial goals.

Investing in a Unit Trust can be a smart move for those looking to grow their wealth and diversify their investment portfolio, while also benefiting from professional fund management. It adds yet another dimension to the power of trusts in protecting and growing our assets.

If you are keen to explore investing in Unit Trust, book an appointment with me here.


Whether in the form of legal trusts that shield our assets and provide for our loved ones, or as the connective tissue in our personal and professional relationships, trust is a cornerstone of a secure and fulfilling life. It's an essential component, capable of building bridges, fortifying bonds, and protecting what we hold dear.

Remember: while setting up a legal trust, ask yourself not just what you want to protect but who. And while building interpersonal trust, remember it's not about just creating connections, but about nurturing meaningful relationships. With trust as your guide, both your assets and your relationships are poised for a secure and flourishing future.


Junwen Chen

My mission is to educate and empower people to design their lives so that they can live in abundance.

Let me partner with you, to design and nurture your dreams and ultimate life goals.


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