FAQs
What is a Trust?
A trust is a legal arrangement in which one party holds property whether real or personal, tangible or intangible on behalf of another for their benefit.
It is a three-party fiduciary relationship where:
- The Settlor (first party) transfers property (which may be money or other assets)
- To the Trustee (second party), who manages the property
- For the benefit of the Beneficiary (third party)
Who are the Parties Involved?
A trust involves three key parties:
- Settlor: The individual who establishes the trust.
- Trustee: The entity responsible for managing the trust in line with the terms of the Trust Deed or Declaration of Trust. In this case, a corporate trustee carries out its duties as outlined in the Trust Deed.
- Beneficiary(ies): The individual(s) who receive the benefits of the trust.
Who is a Beneficiary?
A beneficiary is any individual or entity designated to receive benefits from the trust.
Is there a minimum asset value required to create a Trust?
No, a trust can be created for assets of any value, provided they hold significance to the settlor.
What is a Trust Deed?
A Trust Deed is a legal document that establishes a trust, granting a trustee the authority to manage or hold money or property for the benefit of another party.
Who is a Designated Representative?
A designated representative is an individual (aged 18 or above) appointed by the settlor to act on behalf of the beneficiaries. The trustee is accountable to this representative.
Can my instructions be changed?
Yes, in the case of a revocable trust, the provisions can be modified or revoked at the discretion of the settlor (grantor).
How should I choose a Trustee?
A trustee carries significant responsibility and must be willing to take on the role. It is advisable to select someone:
- Trustworthy and impartial
- Knowledgeable in financial matters
- Capable of making investment decisions in the best interest of the trust
A trustee may be a family member, friend, professional (such as a solicitor or accountant), or a corporate entity like First Ally Trustees Limited. Professional trustees charge for their services, with fees deducted from the trust assets.
What is the difference between a Will and a Trust?
The key difference is that a Will takes effect only after your death, while a Trust can take effect during your lifetime and continue after your passing.
Is a Next of Kin the same as a Beneficiary?
No, they are not the same. Your Next of Kin is essentially your emergency contact and does not automatically inherit your assets. A Beneficiary, on the other hand, is someone specifically named in a legal document (such as a Will or Trust) to receive assets or benefits.
I’m still young and don’t have much. Do I need an estate plan?
Yes. Estate planning is not just for the wealthy—it is for anyone who owns assets, no matter how small. Assets can include jewellery, cash in bank accounts, landed property, or even digital assets. Having a plan ensures your assets are managed and distributed according to your wishes.
Is "Payable on Death" recognised in Nigeria?
No, Payable on Death (POD) instructions are not legally recognised in Nigeria. However, you can achieve similar outcomes through:
- Joint accounts – This allows the surviving account holder to have automatic access.
- A Trust – This ensures assets are managed and distributed to beneficiaries without the delays of probate.
Both options help to bypass Nigeria’s often lengthy probate process.
Wills vs Trusts in Nigeria- Which is better?
| Factor | Will | Trust |
|---|---|---|
| When it Takes Effect | After death | Can take effect during the settlor’s lifetime and continue after death |
| Probate Process | Must go through probate, which can be lengthy and expensive | Avoids probate, allowing immediate access to assets |
| Confidentiality | Becomes a public document during probate | Remains private and confidential |
| Control Over Assets | Only takes effect upon death; no control while alive | Allows settlor to manage assets during their lifetime |
| Flexibility | Less flexible, assets are distributed as stated in the will | Highly flexible, allows structured distribution, even beyond the settlor’s lifetime |
| Risk of Disputes | Higher likelihood of contestation, leading to delays and legal battles | Lower risk of disputes as trusts are legally binding and difficult to challenge |
| Protection from Creditors | No protection, assets can be tied up in legal claims | Provides asset protection and shields beneficiaries from creditors |
| Suitability for Minor Beneficiaries | Assets cannot be transferred to minors directly, requires a guardian | Allows controlled, gradual distribution of assets to minors as they reach certain ages or milestones |
| Tax and Estate Planning Benefits | Limited estate planning advantages | Offers better estate planning and tax benefits, depending on structure |
| Cost of Setup | Less expensive to create | Can be more expensive to set up but offers long-term benefits |