Which Will Trust is Right for You?
One of our core Estate Planning offerings is the use of Will Trusts. Different types of trusts can be written into your Will to protect assets for the family, in case certain problems arise. However, to the average man on the street, there are potentially a bewildering amount of different Will Trusts available, all with different names and uses. To make matters worse, different legal advice firms have different names for the same type of Will Trust!
Although this article is an attempt to de-mystify Will Trusts a little, don’t panic! My main takeaway advice with regard to Will Trusts (and Estate Planning in general for that matter) is to get in touch for an initial meeting with one of our later life specialist advisers. At this initial meeting be prepared to talk about your current situation, what you are looking to achieve and what you are worried about. Once our advisers have got a good grasp of your situation, they will be able to start discussing some recommendations with you, which may or may not involve a specific Will Trust.
Property Protection Trust (PPT)
The PPT is a Will Trust. It only comes into effect when someone dies. It is a type of life interest trust. This means it gives someone, known as the life tenant, the right to use and enjoy a particular asset (in this case a property) for their lifetime. The trust ends when the life tenant dies (or if the life tenant and all the trustees agree to wind up the trust).
The life tenant therefore:
Has the right to benefit, reside in and/or take an income from the property
Never owns the property absolutely, trustees hold for the reminder men (eventual beneficiaries)
Pays for repairs, utilities and maintenance relating to the property
The remaindermen (eventual beneficiaries) therefore:
When the life tenant dies, the trust capital passes to the beneficiaries known as the remaindermen are chosen by the testator.
This allows the testator to give someone the right to live in the property for their lifetime while ensuring that the underlying property capital is protected for the beneficiaries of their choice
Grandchildren’s Trust
A grandchild’s trust, like a children’s trust (which can only be set up by a parent), is catered for by the age contingency in the Will so is inserted in the Will at no further cost. Trustees hold assets on behalf of the grandchildren until the given age of attainment (for example age 25).
Once each grandchild reaches 25 they will receive their legacy.
Standard Discretionary Will Trust
This is the most flexible and the most used of the discretionary Will Trusts and has a very wide range of applications. It is particularly useful, however, where beneficiaries funds need to be managed by a third party or where someone wishes for their estate to be distributed flexibly in response to changing circumstances. The distribution of capital and income is left up to the absolute discretion of the trustees.
The trust is set up via the Will by the testator who chooses a list of potential beneficiaries. Once active, trustees makes decisions about when, where and how to distribute – or accumulate and invest – capital and income.
Crucially, beneficiaries do not have an absolute right to any of the assets held in trust. They only have a potential to inherit. Beneficiaries can be individually named, or named as a class (e.g my children or grandchildren) . Charities or other institutions can also be included.
The trustees will be guided in their decisions by a letter of wishes. This document explains the purpose of the trust and the wishes of the settlor. It is not a legally binding document, or there would be no discretion. The letter of wishes is required for all discretionary trusts, we draft it to ensure its wording is appropriate.
Disabled Person’s Trust
A common purpose of a Will is to allows all children to benefit in a way that is suitable for all their needs (able bodied and disabled children). With a Disabled Person’s Trust, the money for a disabled child will be used for his or her benefit as and when they need it, at the discretion of the trustees.
This trust is used where the testator wishes to leave significant funds to a particular disabled beneficiary with flexibility on what happens next if they should pass away. The beneficiary must meet the statutory definitions of a disabled person. It is taxed differently, more favorably, when compared with a standard discretionary will trust.
The testator will need to elect the disabled person as the primary beneficiary as well as any reserve beneficiaries. During the lifetime of the primary beneficiary, trustees can only apply income and capital for the benefit of that person and can still accumulate income and capital.
When the primary beneficiary dies, the trust can be distributed to the reserve beneficiaries or continue as a standard discretionary trust.
The primary beneficiary must qualify as a disabled person as set out in statute. In essence, this means they must qualify for a specified list of welfare benefits / allowances.
Local Estate Planning Events
To help people understand Will Trusts more clearly, we will be running a series of free Estate Planning seminars locally this June and July. These sessions will explore key elements such as Wills, LPAs and Trusts and explain how they work alongside your financial planning arrangements like inheritance tax, investment management and care fee planning.
Tuesday 23rd June - 2.30pm - 3.30pm - St Peter’s Church, Henleaze
Wednesday 24th June - 10am - 11am - Thornbury URC
Tuesday 30th June - 6pm - 7pm - Stoke Lodge, Stoke Bishop
Wednesday 1st July - 2.30pm - 3.30pm - St Peter’s church, Henleaze
Tuesday 7th July - 10am - 11am - Henleaze Bowling Club
Call 0117 3636 212 or email community@haroldstephens.co.uk to book your place.