Wanting to pass on as much of our wealth and assets as possible to our loved ones is only natural. It’s why estate and inheritance tax planning is so popular these days.
But there’s one important aspect of wills that can easily get overlooked: trusts. So, in this blog, we explain what will trusts are, how they work and why you could benefit from them.
What is a will trust?
A will trust is a trust created within someone’s will. A trust itself is a legal agreement that allows you to place your money, property and investments in the hands of a trustee, who will look after it on your behalf when you pass away.
As a general rule, anyone over 18 can be a trustee – so they can be a trusted family member or friend. Alternatively, you can ask a financial professional, solicitor or accountant to act as your trustee.
This second option is highly recommended. After all, the laws governing trustees are complex, and with professional advice, trustees can avoid falling foul of the rules.
The trustee must administer the trust created by the will in the interest of the designated beneficiaries.
Why use a will trust?
A trust is a useful mechanism for passing on property on death while still exerting some control over how it’s handled, even when you’re gone.
For example, discretionary trusts allow trustees to make certain decisions about how to use the trust income. Depending on the specific agreements, trustees can decide:
- what gets paid out (income or capital)
- which beneficiary to make payments to
- how often payments are made
- conditions the beneficiaries must meet to get a share of the income.
Bare trusts, on the other hand, entitle beneficiaries to the trust as soon as they turn 18 or over (in England and Wales) or 16 or over (in Scotland).
Interest in possession trusts, meanwhile, allow the beneficiary to benefit from the income or assets without giving them full possession of the assets in the trust. Once they move out of a trust property, for instance, the property passes onto a different beneficiary.
There are even other types of trusts and mixed trusts available, so you should always talk to a planning adviser to set up the right trust for your situation and what you’re trying to achieve.
How to set up a will
Setting up a trust in your choice is not something to be considered lightly or done on a whim — putting assets into a trust is an irrevocable decision that should only be done once you’re certain of your decision.
The law dictates that for a trust to be valid, it must establish three certainties: the intention of the settlor to create it, the assets that will make up the trust and the beneficiaries who will receive the income and assets from the trust.
To set up your trust in a way that establishes these certainties, you will need the help of a legal expert and accountant. They will advise you on the important aspects of trusts and prepare the relevant paperwork.
But before you get in touch, or while you’re waiting for a response, there are some things you can think about in the meantime.
For example, which assets you want in the trusts, the individuals you wish to nominate as trustees and the broad aims of the trust.
Get in touch to talk about what you want from a will trust.