We all know the importance of having a Will to ensure our wishes are met after death. However, if you have a complex family situation or need to make sure that a vulnerable family member still receives ongoing care then a Will might not be sufficient. What you actually need is a Trust within your Will. This is called a Will Trust and there are many different types of Trusts which you could include in your Will.
If you include a Trust in your Will, it will take effect when you die and could also help towards minimising the inheritance tax on your estate.
With a Will Trust in place any assets, such as your property, shares or any money, will be transferred to your trustees who will look after the assets on behalf of the beneficiaries. Your trustees are usually two or three people who you name in your Will to look after your assets and distribute them to the right people when you die. A trustee can also be a professional such as a solicitor or a trust company.
What are the benefits to having a Will Trust?
By having a Will Trust you can look after a spouse or partner when you die and also ensure that any inheritance is protected for your children. A Will Trust can also be ideal for second or third marriages when you want to make sure that your children from a previous marriage are looked after.
You can make provisions for a family member or someone with a disability who is unable to look after themselves. Or if you wanted to protect the inheritance for someone who you feel is in an unsuitable marriage or at risk of becoming bankrupt, a Will Trust can help you do that.
Another benefit of setting up a Will Trust is to protect your property from care home fees. If you were to set this up during your lifetime you could include a Protective Property Trust which can offer protection against the family home being sold in order to pay for care home fees.
And not forgetting, you can also minimise inheritance tax with a Trust. By putting your assets, which you no longer need, into a Trust it decreases your own personal wealth and therefore the impact of inheritance tax when you die.
What type of Trust should you include in your Will?
Once you have decided that you want to include a Trust in your Will the next decision is what type of Trust you should use. There are many types of Trusts which can be used and these depend on the type of assets you have and what you are trying to achieve.
The most common is a Discretionary Trust, this gives the trustees the power to decide how assets should be distributed. An example of using this type of Trust is a grandparent or parent who sets up a Discretionary Will Trust in order to protect inheritance for their grandchildren or children. It is then left to the trustees to decide when it is appropriate to distribute the assets. E.g. to help fund a child through university but not to pay for their next holiday or sports car. The trustees would also have the power to make investment decisions on behalf of the Trust.
Are there any downsides to a Will Trust?
As with any decision there are pros and cons to consider. The downside of a Trust is that you place a considerable level of responsibility on the shoulders of your trustees. They may have to make some difficult financial decisions on your behalf and they have to commit to certain duties including keeping accounts up to date, instructing financial advisers and actively managing the Trust.
However, in my opinion the pros out way the cons and by setting up a Trust in your Will you can support your wishes for the future, giving you the reassurance of providing for your family members after your death and ensuring that your assets are inherited by the right person at the right time.