What is a Will Trust?
When you get down to writing a Will, you might need to think about creating a Trust. Trusts can be put in place when you are alive or set up in a Will, which becomes active when you die. The most common asset put into a Trust is property – when one or more people look after a property, it’s usual to want to protect it from either inheritance tax or to make sure a lot of its value is still able to benefit those left behind. Here we look why you might want to create a Trust and how to place it in your Will.
Why might someone want a Trust?
Trust law quickly becomes complicated, but for a lot of people setting one up can secure assets such as property for a partner or children. It’s also a common way of protecting your stuff from inheritance tax, that much debated area when it comes to the financial and legal sides of death.
What you need to set up a Trust in your Will
Most of the time, you’re going to create two main roles, Trustees and Beneficiaries. These are just legal words that mean those you want to manage the trust (Trustees), and those you want to be entitled to the income and capital of the Trust (Beneficiaries).
When do you need a Trustee?
You’ll need to find a Trustee if the person receiving the Trust is under 18. The Trustee or Trustees then legally own whatever’s in the Trust – usually property, but this can be cash, anything that’s got value or has a family significance. The Trustee will then be responsible for taking care of their inheritance until they come of age.
A Trustee is also appointed if a Trust has been set up as part of a Will and holds some of the Estate. The Trust is then managed in line with the terms set out in the Will, rather than its own terms.
It’s common for the same person (or people) to be appointed as both Trustee and Executor. An executor is the person who applies for grant of Probate and dishes out the Will. Read our article on the Probate process here.
What does a Trustee do?
If a Trust is established under the Will then the Trustees become responsible for receiving the inheritance on behalf of the Trust. The executor will then distribute what’s in the Trust to those named Trustees, who are then (bear with us!) legally responsible for managing this property or cash on behalf of the beneficiary.
Types of Will Trusts
One of the most common Trusts is a property Trust. Married partners who want to provide for each other when they die, rather than leaving all of their estate, can gift property in a Trust. Many parents also want to do this for their children: the likelihood of the younger generation putting down their own deposits, or saving as much as earlier generations, is becoming increasingly unlikely.
How to create a property Trust
To protect your home for a partner or any children after you die, you can write your Will in a way that puts half the family home into a type of Trust for when the first partner dies. This means the surviving parent can continue to live in the property held within the Trust: the value of half the home is protected, as half of it is owned by the Trust and the other half is owned by the surviving partner.
In other words, once the property is held in trust, it’s outside anyone’s estate for inheritance tax purposes. This is true if the stuff in the Trust is money or any other kind of gift.
Find out more
We’ve got a lot more information on the legal side of death in our Legal Matters hub
Take a look at our article on inheritance tax here
Learn a bit more about the probate process in our article What is Probate?