The use of trusts in wills

We are all well aware of the need to have a professional will in place to make things easier for loved ones, but a well written will can also protect your estate from forces that may otherwise be beyond your control.

Trusts have been used for a number of years to ringfence assets, but many people see these as complicated or only suitable for the very wealthy.  This is not correct.  In simple terms, a trust is a gift with strings attached.  For example, if you give your house to your husband or wife for their use during their lifetime, but thereafter it must pass to your children, a life interest trust will have been established.  This not only provides for your husband or wife during their lifetime, but it ensures that the underlying asset passes to your children.  These type of trusts can also be used to mitigate against care home fees in later life.  It is a worrying thought that nursing home costs in this area can reach £1,000 per week!  Clearly, it does not take many weeks for an inheritance to disappear!

Another type of trust that solicitors often use to protect a client’s estate is a discretionary trust.  These have a pool of potential beneficiaries, rather than just one or two.  The trustees have discretion as to when and how the beneficiaries benefit from the trust and these are therefore very flexible.  Discretionary trusts can be used in circumstances where parents wish to protect monies from passing to their children’s spouses.  For example, if a child’s marriage breaks down shortly after receiving an inheritance, the inherited assets can pass to the estranged husband or wife.  However, in a discretionary trust the trustees would be able to appoint trusts to potential beneficiaries at the correct time and in the most suitable manner.

Discretionary trusts are also used to provide an inheritance for a disabled or vulnerable beneficiary.  It may be that the beneficiary is unable to manage their own finances or is vulnerable to the influence of others.  In this scenario, the trustees can manage the beneficiary’s money on their behalf and, if necessary, drip feed them a regular income.

When considering trusts within your will, it is important to choose trustees that you trust to carry out your wishes.  To provide them with guidance, a suitably drafted side letter setting out your intentions should form part of the will making process.

We often advise business owners to use trusts within their wills in order to maintain flexibility, and enable their estate to be managed in the most tax efficient manner, without causing difficulties in the smooth running of the business.  Please ask us for advice whether you wish to mitigate care fees, protect your business or simply ensure that your estate passes down intact.

If you have any questions or enquiries and would like to discuss this matter furter, please contact Ben on 01206 217611 or alternatively email on [email protected].