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How do you use a trust in a will?

Adding a trust to a will is a prime example of how a will can be adapted to meet an individual’s specific desires

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Many of us have an automatic response to wills, seeing them as extremely complicated, full of legal jargon and unexpected loopholes.

However first and foremost a will is designed to represent your wishes. They may contain a lot of unfamiliar legal terms, but their top priority is to capture and confirm your final wishes.

Will trusts are a prime example of how wills can be adapted to best meet an individual’s specific desires.

Below, we’ve outlined the purpose and uses of will trusts, including their benefits and the three main types of will trusts.

What is a will trust?

A will trust is a legal entity within a will, which allows a particular asset (known as the ‘trust’) to be managed by a third party (known as the ‘trustee’), on behalf of the beneficiary.

This means that if the beneficiary is deemed to be vulnerable (young or incapacitated in some way) and unable to manage the trust, a trustee will manage the trust, acting in the best interests of both the deceased and the beneficiary.

How do will trusts work?

Will trusts work by giving the trustee the legal right to manage the asset, without being its legal owner.

Instances where will trusts can be used include:

  • When the beneficiaries are young children – and the will writer wishes to make the trusts accessible to them when they are old enough. In the meantime, the trustee can manage the trusts for them.
  • When the beneficiaries are vulnerable – for instance, if they are suffering from a mental health condition, or a long term illness.
  • To protect property – for example, so that it is not sold to someone outside of the deceased’s family.
  • Helps avoid possible conflicts – it might be useful to have trusts managed by an unbiased third party. For example, you might have a new spouse, but have children from a previous partner who you would also like to name as beneficiaries.
  • If you want your assets to be used in a specific way – for example, if you would like to pay for your grandchildren to receive a private education.

What is the job of a will trustee?

Firstly, your executor(s) will complete the terms of your will. Then, the trustees will step in and manage the trusts, as outlined in the will.

The trustee and their instructions for the trusts will be stated in the will.

Their job is to manage these trusts for as long as necessary. This could be, for example, until the beneficiary turns 18. At this point, they will hand the trust over to the beneficiary.

It is the trustee’s legal responsibility to manage these trusts while acting in the best interests of the beneficiaries. In accordance with the Trustee Act 2000, they are required to “exercise such care and skill as is reasonable in the circumstances” and make decisions that exclusively work to the benefit of the beneficiary.

The will trustee has considerable control over the trust and will be able to manage it as they see best. However, any terms or limitations to this control can be specified in the will.

You could appoint one or multiple will trustees, to manage the trusts for one or more beneficiaries.

As you can imagine, the role of trustee is legally complex, and can require a lot of work. As a result, trustees often work alongside a solicitor.

You could choose a friend, family member or legal professional to act as a trustee. Naturally, a trustee will need to be someone that you can trust and depend on to manage this important role. Furthermore, it is highly advisable to ask your chosen trust whether they would be happy to take on the role before you declare it in your will.

We would also recommend that you name a trustee who is not themselves a beneficiary of your will (although this is not a legal requirement). This is because they might be influenced by their own interests. For example, if the property is shared between them and the beneficiary they are acting as trustee for, then they might choose to sell it because they’d prefer the money.

 

What are the benefits of using a will trust?

The main benefits of using a will trust include:

  • Since the trustee is legally obligated to follow the best interests of the beneficiaries, you can be sure that your trusts will be dealt with impartially, with care, and in ways that benefit the beneficiaries.
  • The trustee is also required to protect your assets. This includes preventing creditors from seizing specific assets and reviewing any investments once a year.
  • They give you a greater level of flexibility when distributing your estate, in order to account for personal circumstances, and the requirements of your beneficiaries.
  • There are also Inheritance Tax benefits. But, will trusts can be costly and complicated, so it is advisable to research this thoroughly.

What are the three main types of will trust?

The three main types of will trust are discretionary trust wills, property trust wills, and life interest trust wills.

 

Discretionary trust wills

Discretionary trust wills involve appointing a trustee to manage a trust, on behalf of the beneficiary.

These trust wills include details about who the beneficiary is, when (or if) they will gain ownership of the trust, and how the trust can be managed in the meantime.

Discretionary trusts are most commonly used for young beneficiaries, or beneficiaries who are vulnerable, disabled, or otherwise unable to manage the trust independently.

 

Property trust wills

These are designed to help protect property that is left as a trust. In a property trust will, you can appoint a trustee to protect your property in the way that you wish, before it is taken over by a beneficiary.

For example, your property trust will can specify who receives your property, ensure your wishes are followed (even if your surviving spouse writes a new will following your death), and protect your property from being sold outside of your family, for example.

 

Life interest trust wills

Life interest trust wills can encompass all or part of your estate. It enables you to give someone a life interest in your asset(s), without giving them ownership. Instead, ownership would transfer to another beneficiary, but they would not be able to revoke the life interest that the other party has.

A key example of life interest trust wills used in context is the avoidance of ‘sideways disinheritance’. This occurs when the deceased leaves property to their surviving partner, but the partner remarries. In this case, the automatic inheritance rights transfer from the deceased’s children to the new partner.

Using a life interest trust will, you can give your surviving partner the right to live in your property for as long as they wish, but the ownership of your property is given to your children.

 

Will trusts are commonly used throughout England and Wales. However, having said that, they are a complicated piece of legislation.

So, whatever type of will trust you’re interested in, we recommend that you seek legal advice before creating a will trust.

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