What is a Trust Will?

A Trust Will is a legal arrangement created within your Will that comes into force upon your death. By creating a Trust in your Will, you can set aside assets that people only receive or benefit from under specific circumstances, such as reaching a certain age. Trusts may also be used to protect the value of property, possessions, or investments.

In a Trust Will, the person who created it (the ‘testator’), appoints Trustees to manage the assets that are placed in the Trust for the benefit of the beneficiaries.

Trusts can be created for a variety of reasons, such as providing ongoing support for a spouse or child, protecting assets from creditors or minimising taxes. A Trust Will can be a useful estate planning tool, particularly for those who have worked hard to buy their own home or want to leave their well-earned assets to their children.

Trusts can be complex. They can have tax advantages, but could also have tax implications. If you are looking to create a Trust Will, you should seek legal advice.

The Risks of Sideways Disinheritance

Sideways-a-what-now? Sideways disinheritance is where your beneficiaries can miss out on their inheritance following remarriage after you have died.

The laws of intestacy are complicated. Below we’ve given an example of how sideways disinheritance can occur, and how we can ensure it doesn’t happen. We’ve simplified some of the explanations, to keep our example brief.

Let’s say you are married with one child and own your own home. If you pass away without a Will, your belongings and share of your property pass straight to your spouse. Now, what if your spouse remarries? Their new spouse has exactly the same rights and your child potentially misses out on any inheritance from you.

So, what if you had a Trust Will in place?

In your Will, you can include provisions to pass your share, of your home, to your child. You can also leave your spouse a ‘life-interest’, so there’s no need to worry about them being evicted if you pass away.

By leaving your share of your home in Trust for your child, you have secured their interest in the property. If your spouse remarries, their new spouse will only ever have a share of the remaining half of the property.

Sounds scary, right? Well don’t worry, we’ve got this covered. Our team of Wills and Trusts Planners are experienced in saving estates from sideways disinheritance.

Are Trust Wills a Good Idea?

Trust Wills can be used as an estate planning tool for individuals and families who are looking to use a Will to ensure their wishes are met and their estate is used in the right way after their death. A Trust Will offers various advantages depending on their specific circumstances and objectives. Let’s have a look at some reasons why Trust Wills may be a good idea…

Using Trust Wills for Asset Protection

Trust Wills can help protect assets from various risks, including potential creditors, divorce settlements, or financial mismanagement by beneficiaries. By placing assets in a Trust, you can specify how and when they should be distributed to beneficiaries, providing a level of asset protection.

Control Over Asset Distribution with Trust Wills

Trust Wills allow you to retain control over the distribution of your assets even after your death. You can specify distribution conditions and timelines, ensuring that assets are managed and distributed according to your wishes. This can be particularly beneficial if you have concerns about beneficiaries' financial responsibility or if you wish to provide for children or vulnerable beneficiaries.

Inheritance Tax Planning

There is a potential for Trust Wills to minimise inheritance tax liabilities. Trusts may provide opportunities for tax-efficient asset management, such as taking advantage of tax exemptions, allowances, or reliefs available under UK tax laws.

Working with your Independent Financial Advisor, a Trust Will containing properly structured Trusts can help reduce the overall tax burden on your estate and maximise the value passed on to your beneficiaries.

It is important to note that a Trust could also have tax implications for your beneficiaries without proper planning. Make sure you seek professional advice to best protect your estate and your beneficiaries.

Protection for Vulnerable Beneficiaries:

Trust Wills are commonly used to provide for vulnerable beneficiaries, such as minor children, individuals with disabilities, or those who may not have the financial acumen to manage a large inheritance. This could include beneficiaries who may be addicts who would waste their inheritance. By including provisions for a Trust within your Will, you can ensure that these beneficiaries are provided for and protected according to your wishes.

Flexibility and Customisation:

Trust Wills offer flexibility in estate planning and are completely customisable. You can tailor Trusts to meet your and your family's specific needs. Trusts can be created for various purposes, such as education funding, charitable giving, or asset preservation. You will also choose Trustees to manage your Trust according to your instructions.

Professional Advice for Trust Wills

Given the complexity and potential implications of Trust Wills, it's wise to seek professional advice from a solicitor or estate planning lawyer who specialises in Trusts and estate planning. Our Wills and Trust Planners can help assess your circumstances, goals, and options to determine whether a Trust will be suitable for you and ensure that your estate plan complies with UK laws and regulations.

While Trust Wills offer many benefits, they may not be suitable for everyone, and it's essential to carefully consider the potential advantages and drawbacks depending on your circumstances. Have a chat with our Wills and Trust Planners and we will help you make informed decisions to create an effective estate plan to protect your legacy.

What different types of Trusts can be set up in a Will?

Bare Trusts

A Bare Trust is the simplest form of Trust. In a Bare Trust, all the assets are held for the beneficiary's benefit, provided they are aged 18 or older (in England and Wales).

Assets held in a Bare Trust are registered in the Trustee’s name. However, when the beneficiary reaches the age of 18, they are entitled to the Trust’s contents. This ensures that the assets designated by the settlor are passed directly to the beneficiary.

You can leave assets in a Bare Trust for young children. This type of Trust may be created for the benefit of children who are too young to own assets themselves. Trustees would manage the contents of the Trust until the beneficiary reaches the appropriate age.

Interest in Possession Trust or Life Interest Trust

In an Interest in Possession Trust or Lifetime Interest Trust, the beneficiary can receive income from the Trust immediately but lacks control over the assets generating that income. The beneficiary is liable to pay income tax on the received funds.

It is customary for a settlor to grant their partner access to this type of Trust during their lifetime, with the assets ultimately passing to the settlor's children after the partner's demise.

An Interest in Possession Trust or Lifetime Interest Trust can protect part of your home from residential care home fees for example. This type of Trust is often used in Wills where the person making the Will wishes to provide for a spouse to receive income from an asset or property whilst preserving the actual asset or property for the benefit of someone else at a later date. The spouse would then be able to remain living in the home on the basis that the house is passed to the children on their death.

Discretionary Trusts

Suppose you do not know what the future needs of your family members may be. In that case, you can create a Discretionary Trust and delegate a Trustee to have maximum flexibility for decisions to be made at a later date.

In a Discretionary Trust, Trustees hold full authority over the assets and their generated income, determining how and when to distribute them to the beneficiaries.

This type of Trust is commonly established for grandchildren, with the parents of the grandchildren serving as Trustees.

This type of Trust is also beneficial when a beneficiary may not be able to manage their own financial affairs.

Vulnerable Person Trust

Designed for beneficiaries who are vulnerable, such as individuals with disabilities or orphans, a Vulnerable Person Trust enables them to pay reduced tax on the Trust's income.

What is a Trustee?

A Trustee is a person or entity who is appointed to manage assets on behalf of others (beneficiaries), according to the terms of the Trust. The Trustee has a fiduciary duty, meaning they are legally obliged to act in the best interests of the beneficiaries and manage the Trust assets prudently.

Trustees play a crucial role in ensuring the wishes of the person who established the Trust, are carried out and that the interests of the beneficiaries are protected.

What are Beneficiaries?

Beneficiaries are the people who benefit from the assets left in a Will or a Trust. There might be more than one beneficiary, like several members of the same family, or a group of people.

What the beneficiaries benefit from depends on the wishes of the Testator (the person who created the Will or Trust).

For example, if the Testator has defined an Interest in Possession or Life Interest Trust, they may benefit from the income of a Trust only. This could be permission to carry on living in a property until they die, or taking the rental income of a property they can rent out.

Get in touch with our Trust Wills Solicitors in Sheffield and Barnsley today

Get in touch with our expert Trust Wills Solicitors in Sheffield and Barnsley.

We have local offices across Sheffield in Penistone, Attercliffe, Gleadless and Hillsborough, plus offices in Barnsley town centre and Hoyland.

Give us a call at your nearest branch or fill in our online enquiry form and we’ll give you a call back as soon as possible.