February 20, 2018
Wills Trusts differ to Life Trusts which are created during a person’s life time in that a Wills Trust only arises upon the testator’s (person who makes the Will) death.
Available Wills Trusts
- Discretionary Trust
This can be used to leave your estate or part of your estate to a Trust that is created in your Will. When using a Discretionary Trust, you will identify potential beneficiaries of the Trust but the trustees that you appoint will have total discretion over which of the potential beneficiaries receive anything from the Trust and how they will receive it.
- A Life Interest Trust (Immediate Post Death Interest Trust)
This enables you to put whole or part of your estate including your property into a Trust. You will have to nominate someone to benefit from your Trust and they will be called the “life tenant”. If your Trust includes property the Life Tenant Will have the right to live in the property until they die. If it contains cash and other financial assets then the life tenant is entitled to receive the income generated from those assets. The benefit of this Trust is that the underlying capital that is held in the Trust is protected and whilst the life tenant can take a loan (to be paid back out of their estate when they die) from the capital if the Trust allows it the capital in the Trust is protected for generations to come.
- Property Trust
This enables you to create a Trust that looks after your property or your share in the property. The terms of the Trust would allow you to give someone (usually a spouse or a partner) the right to benefit from that property. This could be the right to live in the property until their death or if the property has been sold the right to the income generated from the proceeds of sale. This differs to a Life Trust as any assets (not just property related assets) can be held in a Life Trust.
Who Manages a Trust?
You will appoint trustees in your Will. A trustee takes responsibility for managing money, property and other assets that have been set aside in a Trust for someone else. They will manage it for them and use it only in their best interests and accordance with the testators wishes under the Trust and they must obey the rules of that Trust. A trustee is responsible for paying any income tax, inheritance tax or capital gains tax that is due on behalf of the trust. Being a trustee is a legal responsibility that must be taken seriously and you must be sure that you have appointed the right trustees that you Trust implicitly to carry out your wishes.
Why have a Wills Trust?
- You can protect your assets from marriage breakdowns. For example, you may wish to protect your assets for your children or other loved ones if your spouse or partner remarries in the future. You may have a child that you love but you are not keen on their partner. If you use a Trust you can let your child have the benefit of the Trust but ensure that your assets are protected and pass to your grandchildren on your child’s death rather than their spouse or partner.
- Your beneficiaries may be too young to manage the assets or they may not want to manage the assets. Maybe someone in your family has a disability and you want their inheritance managed for their best interests.
- Your beneficiaries may be spendthrift or have an addiction so you do not want them to have instant access to the assets. The assets can be distributed over time through a Trust.
- It is possible to use Trusts to save on inheritance tax when you pass away. Provided certain conditions are met, when you put things in Trust they no longer belong to you and so do not count towards the value of your estate for inheritance tax purposes. There are some exceptions to this and Trusts do not save you from paying all taxes so you should consider the best type of Wills Trust for you.
For more information about Wills Trusts and whether a Will Trust is right for you contact Spencers Solicitors today on 01246 266637 or complete our short online enquiry form.
About the Author
Samantha Ibrahim is a Private Client Practitioner within our Wills and Probate team.
Samantha joined Spencers Solicitors in 2010 is lead Private Client Practitioner in our Wills and Probate Department. Her role involves taking instructions on and drafting Wills, lasting powers of attorney for individuals and businesses, making applications for Court of Protection deputyship, probate, all aspects of administration of estates and deeds of variation. This includes contentious probate.