One of the most common fears is that setting up a Trust means losing one’s assets. Many people worry that once assets are transferred into a Trust, they are handed over to the Trustee, who then has full freedom to do with those assets as they please. This is incorrect. A Trust operates in line with the provisions of the Deed of Trust entered into by the Settlor and the Trustee and the Trustee has a fiduciary duty to the beneficiaries of the Trust. The Trust Deed outlines how the assets should be managed, who the beneficiaries of the Trust are, and the modalities for distributions, if any. Trustees are legally required to follow these instructions. In fact, a Trust often provides more protection rather than less, especially where the Settlor becomes incapacitated or passes away, as the assets continue to be administered in line with the Settlor’s wishes as provided in the Trust Deed.
Another
typical
misconception relates to Trust expenses.
Trusts are often thought to be too expensive in their setup and maintenance, but
this view rarely considers the cost of poor or no estate planning. In Nigeria,
where a person dies without proper planning, their family may be
discouraged by a protracted
probate process,
family disputes, legal
fees, and the possibility that some of the estate may be untraceable, coupled with estate taxes
and charges. These costs can significantly reduce what is eventually available
for the estate beneficiaries.
Over time, a Trust may prove to be a more cost-effective and efficient way of
transferring assets to your beneficiaries.
Many
people also misunderstand the purpose of a Trust and assume it is an investment
or wealth creation tool. This often leads to expectations of high returns. A
Trust is primarily a capital preservation and wealth
transmission tool. Its
main purpose is to protect assets, preserve wealth, and ensure the smooth transfer
of assets across generations. While Trust assets may be invested, the focus is
on safety, stability, and long-term protection rather than aggressive
profit-making. When a Trust is judged only by investment returns, its true
value is often overlooked.
As earlier
mentioned, there is a
widespread belief that Trusts are only suitable for very wealthy individuals or
large families. This is not the case. A Trust can be useful for anyone who owns
assets and wants clarity on how those assets should be managed and transferred.
This includes professionals, business owners, and families who may own
property, company shares, or even a single significant asset. In many cases,
people who need
Trusts are those who
cannot afford disputes, mismanagement, or delays if they become incapacitated
or pass away.
A
Trust can operate during a person’s lifetime, provide for estate management in
the event of illness or incapacity, and allow Beneficiaries to access assets
after the Settlor’s death without delays. A Trust can also be used to distribute
assets while the Settlor is still alive.
Another
misconception, which is a legitimate concern, is how one can be confident that the Trustee will abide by
the Trust Deed provisions.
Some people worry about the honesty, competence, and accountability of Trustees. While
choosing the right Trustee is important, the Trust structure itself provides
strong safeguards against abuse. Beneficiaries are also entitled
to the protection afforded by the law where Trustees are in breach of their
fiduciary duty.
Trusts
are about planning ahead, reducing uncertainty, and protecting family and
assets from avoidable problems. A Trust allows people to make clear decisions
while they are alive, rather than leaving difficult questions for their loved
ones to resolve later.
When properly structured, a Trust is not complicated at all. It is simply a practical and effective way to protect what matters most and ensure peace of mind, both now and in the future.
