Brief:Revocable trusts
Sheillah NanyongaRevocable Trust is a legal entity created to hold and manage your assets during your lifetime and distribute them after your death without going through probate. You can change or cancel it anytime while you’re alive and competent. It offers privacy and continuity if you become incapacitated but doesn’t protect assets from creditors or reduces taxes.
It’s essentially a written agreement where you the grantor, transfer assets to a trustee to manage according to your instruction.
Who is a grantor?
A grantor, according to revocable trusts, is the individual who creates the trust and transfers assets into it. The grantor is also referred to as the trustor or settlor. In a revocable trust, the grantor typically retains the power to alter or revoke the trust during their lifetime. The grantor may also act as the trustee, managing the trust’s assets, and can name themselves as the beneficiary, receiving income or benefits from the trust assets during their lifetime. Upon the grantor’s death, the trust becomes irrevocable, and a successor trustee takes over the management of the trust on behalf of the beneficiaries. investopedia.com
Roles of a grantor.
Creator of the Trust: The grantor establishes the trust and determines its terms, including the selection of a trustee and beneficiaries.
Controller of the Trust: The grantor maintains the power to revoke or amend the trust during their lifetime, which means they can change the terms, remove or add assets, or even terminate the trust entirely.
Tax Obligations: In a revocable trust, the grantor is generally treated as the owner of the trust assets for tax purposes. This means the grantor is responsible for reporting and paying taxes on any income generated by the trust.
Beneficiary of the Trust: The grantor can also be a beneficiary of the trust, receiving income or principal from the trust during their lifetime.
*Creator of the Trust: The grantor establishes the trust and determines its terms, including the selection of a trustee and beneficiaries. Controller of the Trust: The grantor maintains the power to revoke or amend the trust during their lifetime, which means they can change the terms, remove or add assets, or even terminate the trust entirely. Tax Obligations: In a revocable trust, the grantor is generally treated as the owner of the trust assets for tax purposes. This means the grantor is responsible for reporting and paying taxes on any income generated by the trust. Beneficiary of the Trust: The grantor can also be a beneficiary of the trust, receiving income or principal from the trust during their lifetime.
Who is a trustee?
A trustee, according to a revocable trust, is the person or entity responsible for managing the assets held within the trust for the benefit of the beneficiaries.
The trustee can be an individual or a financial institution, and in many cases, the grantor (the person who creates the trust) serves as the trustee during their lifetime.If there is more than one trustee, they are referred to as co-trustees, and a successor trustee can be named to take over if the original trustee is unable to fulfill their role.The trustee is also a fiduciary, meaning they have a legal obligation to act in the best interests of the beneficiaries. consumerfinance.gov
Roles of a trustee.
A trustee in a revocable trust in Uganda is responsible for administering the trust according to the terms set forth by the grantor.
The trustee must communicate with beneficiaries, allocate funds to investments, distribute payments according to instructions, and ensure that the grantor’s wishes are fulfilled. investmentopedia.com
The trustee has a fiduciary responsibility to the trust’s beneficiary or beneficiaries, meaning they must act in the best interests of the beneficiaries as they manage the trust’s assets.
The trustee may be an individual, family member, multiple individuals, or a corporate entity such as a bank or trust company.
In a revocable living trust, the grantor may act as the initial trustee, retaining control over the assets of the trust. However, the trust document designates successor trustees to take over the role if the grantor becomes incapacitated or passes away.
The trustee’s specific duties are unique to the trust agreement and are dictated by the type of assets held in the trust.
How do Revocable Trusts work in Uganda
In Uganda, the concept of trusts is governed by the Trusts Act (1882) and common law principles.
Revocable trusts in Uganda allow the grantor to maintain control over the assets, meaning they can alter the terms, change beneficiaries, add or remove property, or even dissolve the trust as their circumstances or wishes change.However, it is important to note that assets held in a revocable trust remain part of the grantor’s taxable estate because they maintain complete control over them. justvanilla.com
In Uganda, a trust can be either a private trust or a public charitable trust. Private trusts are not given any tax benefits by the Government of Uganda, whereas public charitable trusts may be eligible for tax exemptions if they meet certain criteria. The trust is recognized in many civil-law countries and can serve as a bridge between different legal systems. bhmllaw.org
To establish a revocable trust in Uganda, the grantor must create a trust deed, which outlines the objectives, beneficiaries, and management of the trust. The trust deed must be registered with the appropriate authorities, and the settlor and two witnesses must be present during the registration process.
It is recommended to consult a reputable firm of attorneys with experience in trust law to ensure proper drafting of the trust deed and registration. Trusts can be used for various purposes, including tax savings and improved asset management, but the specific benefits depend on the applicable rules in the country of residence of the settlor and beneficiaries.
Advantages of Revocable Trusts.
Revocable trusts offer several advantages in Uganda, particularly in estate planning and asset management. These trusts allow the grantor to maintain control over the assets while providing flexibility and privacy. For instance, a revocable trust can help avoid the probate process, which can be costly and time-consuming.
By transferring assets into a revocable trust, the grantor ensures that the successor trustee can manage the assets immediately upon the grantor’s death or incapacity, without the need for court intervention.
Additionally, revocable trusts can provide privacy, as the trust agreement does not need court approval and remains confidential.
However, it is important to note that the specific advantages and considerations of revocable trusts in Uganda should be discussed with a legal expert to ensure compliance with local laws and regulations. phillipslytle
Limitations of Revocable Trusts iin Uganda.
A revocable living trust in Uganda does not provide creditor protection, as the settlor retains control over the assets, making them accessible to creditors.
The ability of a creditor to reach assets is directly proportionate to how much control the settlor can exercise over those assets.
If the settlor is the trustee of their revocable living trust, they can amend or revoke the trust and withdraw assets, which means creditors may access the trust’s assets almost as easily as they can access assets not in a trust.
However, the less control one has over the assets, the less chance a creditor can reach them.
In summary, while the Trusts Act (1882) provides the legal framework for trusts in Uganda, it does not specifically address revocable trusts. The conclusion of revocable trusts in Uganda is primarily governed by the terms of the Trust Deed and the discretion of the settlor and trustee, with the current legal framework being considered outdated and in need of review. mmsaddvocates