Taking Control: The Growing Trend of Will Trusts
Wills are increasingly being used to create trusts to benefit loved ones after someone’s death. We take a look at why you might want to leave money in a will trust and how this is handled.
Trusts are set up by executing a trust deed during your lifetime or alternatively by leaving money or other assets in trust in your Will.
There are a range of reasons why people choose to leave money in a trust in their Will rather than giving a lump sum directly to a beneficiary. The type of Trusts you can implement include:
Children’s Trusts
Leaving money in trust for a child or young person until they attain a specified age. This could be 18, but you could also opt for an older age, such as 25. Some feel that a child is better able to manage an inheritance later on.
Discretionary Trust
Leave money in a discretionary trust to a group of individuals. Therefore the trustees can distribute funds as they see fit. For example, you may want to leave a sum to all of your grandchildren. You can write a letter to the trustees setting out what sort of things you would like them to release money for. This may be for education, a car or a deposit for a home.
A discretionary trust can also protect inheritance from risks such as divorce or bankruptcy. For example, if you were to leave money to your child and they were to divorce, the money you left them is likely to be taken into account when splitting assets on divorce. Similarly, if they were to become bankrupt, a trustee in bankruptcy would be able to take any money they had inherited to clear their debts. Money left in a discretionary trust will be protected from this.
Protective Property Trust
To protect your share of a jointly owned property. If you own your home with someone else, you can leave them a lifetime interest in your share of the property. Meaning they are able to live there for as long as they want. They cannot leave your share to anyone in their Will, neither can they sell the property and profit from your share themselves. Therefore it is protected against loss. For example, if the other person were to marry or to make a bad investment.
Vulnerable Beneficiary Trust
Beneficial when leaving money directly to someone who is unable to manage their own affairs or likely to spend the money unwisely. Trustees control the funds and ensure that it is only released when they believe it is appropriate to do so.
Also an advantage when leaving money to someone who might lose benefits if they inherited a lump sum. For example, if you left money to someone who receives means-tested disability benefits. As a consequence of the inheritance they could lose their benefits. However, if they become the beneficiary of a discretionary trust, this does not affect their benefits status.
Benefits of leaving money in trust in your Will
Leaving money in trust can offer a higher level of protection than passing on a lump sum. You have the opportunity to set out in a letter to the trustees how you wish the money to be used. Importantly, this can prevent funds from being frittered away or spent where you would not want them to be.
Additionally, you can require certain criteria to be met. For example, you may only want funds released if the beneficiary accomplishes something, such as finishing their education. You are strongly advised to speak to a Wills and Trusts expert about setting up a Will trust. Always seek qualified professional help.
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