How to set up a trust in Nigeria: A step-by-step guide 

How to set up a trust in Nigeria: A step-by-step guide 

How to Set up a Trust in Nigeria

Trusts might sound complicated, but they’re a powerful way to protect your assets, plan, and make sure your loved ones are taken care of. In this easy-to-understand guide, we’ll show you how to create trust in Nigeria.

Trusts are an essential financial tool that offers individuals and families an effective means of managing and protecting their assets. While the concept of trusts may seem complex and reserved for financial experts, this article is here to break down “trusts” and communicate the process of setting up a trust in Nigeria. Whether you’re a business owner, a parent, or someone looking to safeguard your assets, this guide will help you understand the need for trust and how to establish one. 

Understanding Trusts

A trust is a legal entity created to hold and manage assets for the benefit of specific individuals or purposes. In Nigeria, trusts are governed by the Trustee Investment Act of 1962. Trusts can be used for various purposes, such as estate planning, asset protection, charitable giving, and more. Here are the key elements to grasp: 

Trustee: The trustee is the person or institution responsible for managing the trust and its assets. They have a fiduciary duty to act in the best interests of the beneficiaries. 

Beneficiaries: Beneficiaries are the individuals or entities who will benefit from the assets held in the trust. These can be family members, loved ones, or even charitable organizations. 

Trust Property: This is the property or assets placed in the trust, which is held and managed by the trustee. 

Why Trusts Matter for Everyone 

Trusts are like a powerful tool that anyone can use to protect their assets and plan for the future. Let’s look at some everyday situations where trusts can help:

Taking Care of Your Family: Imagine you want to ensure your family gets your money and property after you’re gone. Trusts can help you do that while avoiding confusing legal stuff and saving money. 

Shielding Your Assets: Worried about people trying to take your things or lay claim on your assets? Trusts can help protect against that. Some trusts can act as a shield, protecting your assets from trouble like debts and legal claims. 

Charitable causes: Maybe you want to support a charity close to your heart. With a charitable trust, you can help out and get some tax benefits along the way. 

Protecting the Kids: If you have kids, you can create a trust to watch over your money and property until they’re old enough to handle it themselves. 

Keeping Your Business in the Family: If you own a business, trusts can help make sure it’s smoothly passed down to the next generation without a big fuss. In the case of many Nigerian families, extended families fighting over property or assets.

How to Set Up a Trust in Nigeria

Now that you understand the importance of trust, let’s dive into the process of creating trust in Nigeria: 

Step 1: Define Your Objectives

The first step in setting up a trust is to clarify your goals and intentions. Think about: 

Purpose: Why do you want to create a trust? Is it for estate planning, asset protection, charitable giving, managing assets for minors, or business succession? 

Assets: What property or assets do you want to include in the trust? It could be money, real estate, investments, or other valuable items. 

Beneficiaries: Who should benefit from the assets held in the trust? This might be your family members, loved ones, specific individuals, or even charitable organizations. 

Defining these objectives will guide the entire trust creation process.

Step 2: Choose the Type of Trust

In the second step, you’ll need to choose the right type of trust for your specific needs. This might sound complicated, but don’t worry, a legal expert can help you decide which type of trust is best for you. There are various options, including: 

Revocable or Irrevocable: Revocable trusts allow you to change or cancel the trust’s terms, while irrevocable trusts are more permanent and can offer stronger asset protection. 

Testamentary or Living: A testamentary trust is created in your will and becomes active after your passing, whereas a living trust operates while you’re alive. 

Charitable or Family Trust: Depending on whether you want to support charitable causes or manage family assets, you can choose the appropriate type. 

Step 3: Select a Trustee

A trustee is like the manager of your trust. It’s essential to choose a trustworthy individual or institution for this role. They should understand their fiduciary responsibilities, meaning they must act in the best interests of the beneficiaries and follow the trust’s rules. You can discuss your choice with a legal advisor to ensure you make the right decision. 

Step 4: Draft the Trust Deed

The trust deed is a crucial legal document that outlines all the terms and conditions of your trust. It must be comprehensive and meet legal requirements. It essentially serves as the rulebook for your trust, detailing how it should operate and how the assets should be managed. 

Step 5: Fund the Trust

To officially establish the trust, you’ll need to transfer your chosen assets or properties into it. This process should follow all the necessary legal procedures and requirements. It’s essential to keep thorough records of this transfer to demonstrate that the assets now belong to the trust. 

Step 6: Registration and Compliance

Depending on the type of trust and the assets involved, you might need to register the trust with relevant authorities. Additionally, ensure that your trust complies with tax regulations and other legal requirements. This is another area where legal advice can be invaluable to ensure you meet all legal obligations. 

Step 7: Regular Review

Once your trust is up and running, it’s not a “set it and forget it” situation. Periodically, you should review the trust’s objectives. If your circumstances change or if you have new goals, you can make amendments to the trust deed to adapt to these changes. 

Organizations Offer Trust Services in Nigeria

In Nigeria, several organizations offer trustee services to assist individuals, families, and businesses in setting up and managing trusts. These organizations have the expertise and experience needed to ensure that trusts are properly established and managed according to the law. Here are a few examples of organizations that provide trustee services in Nigeria: 

Asset & Resource Management Holding Company (ARM): ARM is a prominent financial services group in Nigeria that offers trust services. They provide solutions for asset management, estate planning, and wealth preservation, making them a reliable choice for individuals and families. 

Stanbic IBTC Trustees Limited: Stanbic IBTC Trustees is a subsidiary of Stanbic IBTC Holdings, a leading financial institution in Nigeria. They offer various trustee services, including estate planning, employee benefit trusts, and more. 

Leadway Capital and Trusts: Leadway Capital and Trusts is known for its trust and fiduciary services, catering to the needs of individuals, businesses, and organisations. They specialise in various trust types, including charitable trusts and will trusts. 

FSDH Merchant Bank Trustees Limited: FSDH Trustees is a subsidiary of FSDH Merchant Bank and provides trustee services that cover estate planning, wills and probate, and various types of trusts. 

First Trustees Nigeria Limited: First Trustees is a dedicated trust company in Nigeria, offering services related to private trust, Islamic finance trust, and charitable trusts. 

United Capital Trustees Limited: United Capital Trustees provides trustee and estate planning services. They have a team of experienced professionals to assist with trust creation and management. 

Union Trustees Limited: Union Trustees is a trusted name in the industry, offering a variety of trustee services, including private trust, Islamic finance trust, and corporate trustee services. 

TrustBond Mortgage Bank Plc: TrustBond provides trustee services in addition to mortgage banking. They can assist with setting up trusts and managing assets. 

Trust vs Will: Key considerations

A will and a trust are both important legal documents that can be used to manage your estate and distribute your assets after your death. However, there are some key differences between the two that you should consider when deciding which one is right for you. 

Will

A will is a legal document that outlines your wishes for the distribution of your assets after your death. It also names an executor, who is responsible for carrying out your wishes. Wills are relatively simple to create and can be done without a lawyer. However, wills can be probated after your death, which can be complex and expensive. 

Trust

A trust is a legal arrangement that allows you to transfer ownership of your assets to a trustee, who will then manage those assets for the benefit of one or more beneficiaries. Trusts can be created during your lifetime (living trusts) or after your death (testamentary trusts). Trusts offer a few benefits, including: 

  • Elimination of probate: Assets in a trust are not subject to probate, which can save time and money. 
  • More flexible asset management: Trustees can manage trust assets in a way that is consistent with your instructions, even if those instructions change over time. 
  • Protection of assets from creditors: Assets in a trust are generally protected from the claims of creditors. 

Key Considerations

The following are some key factors to consider when deciding whether to create a will or a trust: 

  • Complexity of your estate: If you have a simple estate, a will may be sufficient. However, if you have a more complex estate, or if you want to provide for special needs beneficiaries, a trust may be a better option. 
  • Cost: Creating and administering a trust can be more expensive than creating and administering a will. 
  • Privacy: Wills are public documents, which means that anyone can review them. Trusts are not public documents, which can provide more privacy for your estate planning arrangements. 

Consulting an Attorney

It is important to consult with an attorney to discuss your estate planning needs and determine which document is right for you. An attorney can help you create a plan that meets your specific goals and objectives.

Here is a table summarizing the key differences between wills and trusts:

FeatureWillTrust
When it takes effect After death Immediately or upon funding 
Probate Yes No 
Asset management Trustee manages assets according to instructions in the will Trustee manages assets according to instructions in the trust document 
Creditor protection Limited Generally, more protection 
Privacy Public document Not a public document

Final thoughts?

Setting up a trust in Nigeria is a valuable financial and legal tool accessible to individuals, families, and businesses. Trusts offer a way to protect and manage assets, and plan, and support charitable causes. The steps outlined in the article, from defining objectives to regular review, serve as a comprehensive guide to help anyone navigate the trust creation process. 

The key takeaway is that owning trusts isn’t limited to *rich people*. They are versatile tools that empower individuals to secure their financial future and achieve their long-term goals, whether their parents are planning for their family, business owners, or anyone looking to safeguard their assets. Seek advice from legal and financial professionals to ensure you set up a trust that aligns with your specific needs and objectives. Trusts can indeed be a key to financial security and peace of mind.

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