What is a Will Trust?
Read on for our overview on Will Trusts.
1) Summary in 30 Seconds
- A Will Trust is a type of Will that includes a Trust that only comes in effect after your death.
- In the Trust, you can leave your possessions, property and assets to your beneficiaries with more control and options than a regular Will.
- There are lots of benefits to setting up a Will Trust, but they can be complex documents to write.
2) What is a Will Trust?
As it is part of your Will, a Will Trust comes into effect after your death. Instead of your Executor(s) distributing all of your estate immediately to your Beneficiaries, whatever you decide of your assets is put into a Trust. With a Trust, you can take more control over when and how your Beneficiaries are going to inherit – you can stipulate that these assets are held until a certain event, date or when your beneficiaries reach a certain age.
For example, you may want these assets held in trust until your children or grandchildren are 18 or 25 years old, or have finished university.
So a Trust consists of 3 parties:
- The Settlor – This is you.
- The Trustee – This is the person(s) assigned to manage the Trust.
- The Beneficiary – These are person(s) who are going to benefit from the Trust.
Many still associate Trusts with people who are extremely wealthy, perhaps with vast estates. But Trusts are not just beneficial for the wealthy. They can be useful for many different kinds of people.
- Property Benefits. Many families have the majority of their wealth in a property. Your property is therefore likely to make up a large part of your estate. But your property is more than just an asset – it is your home, where you and your spouse or partner live, and will need to to live until you die. A Will Trust can ensure that this inheritance passes to your chosen beneficiaries no matter what.
- Protection for Blended Families. In the last few decades, the number of step- and “blended” families has increased exponentially. This means many more people are getting remarried, with some having more children together. This creates a complex family dynamic. If you are married with children or grandchildren from a previous marriage, you will want to make doubly sure that their inheritance is protected. Through a Will Trust, you can make specific stipulations that protect against this inheritance after you’re gone.
- Protection against Inheritance leaving “sideways”. This is a term that describes how an inheritance meant to support and sustain your beneficiaries well into the future can be frittered away in ways you didn’t account for. For example, in a child or grandchild’s divorce settlement or bankruptcy. Before they know it, any money or assets have gone. You can protect against scenarios like this.
3) What If I Just Have a Will?
If you are reading this and wondering whether the Will you already have is still sufficient, there’s no need to panic. Having an ordinary Last Will and Testament is a very important step, and one that over half of adults in the U.K. still have yet to make.
A regular Will is going to be a great help to your family when they are winding up your estate. It not only outlines who will inherit what, but probably also includes the Guardian arrangement for any minor children, names who will care for your pets, your funeral plans and other essential information. Without a valid Will, your estate will be Intestate. This can be a huge headache for your family, causing additional stress and expense.
If you have undergone any recent major life changes, it might be time to reconsider whether your Will is still up-to-date and relevant to your new circumstances.
- Have you recently bought or sold a property?
- Have you bought a second home?
- Have you gotten married or divorced?
- What about your children?
If these or anything else significant comes to mind, it might be time to simply update your Will. It might be worth also talking to a solicitor who can advise you on whether a Will Trust could be beneficial to your estate.
4) Will Trusts : Pros & Cons
Everything has its drawbacks, and not everything is “one size fits all”. It’s important to weigh up all your options before going down any route. This is especially true when it comes to a legal document that has lasting effects after your death. We want to make wise financial decisions that can benefit our families, but we also want to avoid any unnecessary stress or conflict.
- Greater control. In a regular Will you can stipulate who is to inherit from your estate. With a Will Trust, you can not only name who your Beneficiaries are but when and how they are to inherit from your estate. If you have specific wishes that are important to you, with a Will Trust you can ensure that this will be adhered to after you are gone.
- It applies to any assets in your Trust. As with a Will, you are able to leave any personal possessions, property or monies in a Trust.
- It can have tax advantages. A Will Trust can potentially impact the amount of Inheritance Tax your Beneficiaries would have to pay. You should consult a solicitor who can advise you on this.
- Complex set-up. Writing a simple Will is relatively straightforward, it is even possible to write a basic Will yourself. Of course, this Will would be limited in scope. A Will Trust accounts for more than a regular Will does, but this also means it can be a more time-consuming and complicated document to create.
- It is a big responsibility for your Trustees. Due to the heavy legal and financial implications, being the Trustee of an estate can be a weighty and time-consuming task. There is no one central body to oversee Trustees, which means they will have to personally seek advice or guidance if they run into problems. If you are looking to have a Will Trust made, think carefully about who you can appoint as your Trustees.
5) Talk to a Solicitor
A Will Trust is just one kind of Trust available. There are also Lifetime Trusts, Discretionary Trusts and more. As with all legal matters, don’t attempt to do this alone. Before making any decisions, find a solicitor who specialises in this area who can advise you fully on your options.
We can only take in so much information, so it’s important to have an impartial party take a look at your situation and assess what would work best for you. By instructing a solicitor, you not only benefit from their legal knowledge and expertise as well as their professional oversight. As the years go on, you might want to amend or change the Will Trust, and it can be very beneficial to have legal support you can rely on.