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Protect Your Assets by Incorporating a Trust into your Will
When you die, your hard-earned assets could fall into the hands of people you don’t know. Whether that’s a new spouse for a partner you leave behind, long lost family members coming crawling out of the woodwork to claim their share, or even the taxman, everyone’s out to get their greedy mitts on your treasure.
Utilising a Will-Based Trust helps you protect your treasure by only giving the key to people you trust.
What is a Will-based Trust?
A Trust is like a treasure chest of your assets that you store away for safekeeping – like a pirate hoarding their booty. They allow you to safeguard your money, your property, and other valuables.
Trusts have many benefits, but the main one is that they allow you to ensure your assets don’t fall into the wrong hands. Having a Trust built into your Will means you can allow someone to enjoy your assets whilst not actually giving them ownership – you control where they ultimately go. Read on for more information and examples!
Future estates could be taxed up to 40% if they go over the threshold.
In 2019, the government gained £3.49 Billion in inheritance tax from people’s estates.
What Are The Main Threats to My Assets?
Tax Charges
If you leave an estate in your Will, it’ll become part of the assets of your beneficiaries. They’ll be chuffed – their estate will grow massively. It could, however, impact the inheritance of future generations, as when your beneficiaries pass away, their estate, now inflated by yours, will likely be pushed over the tax threshold. If it does, it could be taxed up to 40%. You don’t want the taxman robbing 40% of your hard-earned estate!
If you put your assets in a Trust, however, they then exist outside of your beneficiaries assets – they don’t technically own them. This means they’re much less likely to break the threshold. Unlucky, taxman! Hands off.
Inheritance Laws
Leaving your assets to your loved ones in a Will isn’t enough to ensure control over your assets in the long term. If your partner remarries after your death, it might end up disqualifying your children from inheriting anything you’ve left behind. This is known as ‘sideways inheritance’.
With a Trust, you can set out your wishes exactly, ensuring your children inherit what’s rightly theirs, whatever happens. The assets within the Trust are protected from the standard lines of inheritance and this prevents anyone else from distributing your estate to someone you wouldn’t want to have it.
Watch the Video to Find Out Who the Biggest Threats to Your Assets Are…
How Can a Will-Based Trust Help me Protect my Assets?
Choose exactly who has access to your assets.
Avoid sideways inheritance – make sure your beneficiaries inherit what you want them to!
Trusts can have financial benefits.
Provide better financial support for your dependants’ futures.
Give your loved ones quicker access to their inheritance when you’re gone.
Gain better flexibility over how your assets are managed in the long-term.
The Trusts we offer are an optional addition to our Bespoke Will service. Click here to find out more about Bespoke Wills.
How Does a Will-based Trust Work?
A Will-based Trust allows you to split the ownership of your assets in any way you see fit. Think of it as a treasure chest which you can fill with money, property and other valuables. By placing them in the chest, you control who has access by only giving the key to those you trust.
There are three main roles in the functioning of a Trust. Keep in mind that all parties involved in the Trust do not have to be exclusive in their roles.
The Settlor
Deposits their assets in the chest for safekeeping, and appoints the people who will guard it.
The Trustee
Guards the chest, and follows the guidelines outlined in the Trust by the settlor.
The Beneficiary
Has access to the chest, and benefits from the assets when the guidelines allow.
Watch the Video To See How a Trust Could Help You Protect Your Assets…
What different types of Will-based Trusts are there?
Protective Property Trust
Protect your Property for your Beneficiaries!
A Protective Property Trust is a ‘life interest’ Trust that lets you put your share of your property into a Trust, allowing someone else to be ‘life tenant’. They’ll be entitled to live in the property until specific conditions are met (such as their death or remarriage). Once the conditions are met, the property is then released to your chosen beneficiaries.
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Protective Property Trusts are perfect if you’d like to allow your spouse to continue living in your property but utlimately want to ensure it passes onto your children!
The Trusts we offer are an optional addition to our Bespoke Will service. Click here to find out more about Bespoke Wills.
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Protective Property Trusts are perfect if you’d like to allow your spouse to continue living in your property but ultimately want to ensure it passes onto your children!
What different types of Will-based Trusts are there?
Protective Property Trust
Protect your Property for your Beneficiaries!
A Protective Property Trust is a ‘life interest’ Trust that lets you put your share of your property into a Trust, allowing someone else to be ‘life tenant’. They’ll be entitled to live in the property until specific conditions are met (such as their death or remarriage). Once the conditions are met, the property is then released to your chosen beneficiaries.
?
Protective Property Trusts are perfect if you’d like to allow your spouse to continue living in your property but utlimately want to ensure it passes onto your children!
The Trusts we offer are an optional addition to our Bespoke Will service. Click here to find out more about Bespoke Wills.
?
Protective Property Trusts are perfect if you’d like to allow your spouse to continue living in your property but ultimately want to ensure it passes onto your children!
Discretionary Trust
Not Sure How You Want to Distribute Your Assets?
A Discretionary Trust is the most flexible type of Trust. It allows your Trustees to decide how money is shared out amongst your Beneficiaries. The main reasons for setting up this type of Trust are:
- You want your Beneficiaries to receive their entitlement in instalments.
- You want distribute your assets to different Beneficiaries at different times.
- You aren’t sure a certain Beneficiary would use their entitlement sensibly.
Imagine, for example, that one of your Beneficiaries is quite young and you’re worried that they aren’t mature enough to handle a large sum of money. Using a Discretionary Trust, your Trustees could withhold a portion of the entitlement and ensure it isn’t wasted.
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Although ultimate control over the Trust is given to the trustee, you can create a ‘Letter Of Wishes’ to go with the document. This gives guidance to your trustees on how you want the funds to be handled on your behalf, but keep in mind that they don’t have to follow it – it’s not legally binding.
The Trusts we offer are an optional addition to our Bespoke Will service. Click here to find out more about Bespoke Wills.
?
Although ultimate control over the Trust is given to the trustee, you can create a ‘Letter Of Wishes’ to go with the document. This gives guidance to your trustees on how you want the funds to be handled on your behalf, but keep in mind that they don’t have to follow it – it’s not legally binding.
Who Can I Appoint as a Trustee?
You’ve got to make sure that no matter what type of Trust you’re creating, you choose responsible and reliable trustees. All trustees (and there can be more than one per Trust) must meet the following criteria:
They must be at least 18 years of age.
They can be a family member, friend or professional acting on your behalf.
You should choose people that you Trust absolutely – it’s an important role!
You must be confident that they have the best interests of the beneficiaries at heart.
We advise you to choose at least 2 trustees, but no more than 4. Make sure there’ll be no tension between the trustees.
If you’d rather have someone outside of your family be a trustee, you can appoint a professional such as a solicitor, Trust company or accountant.
They’ll need to fully understand the responsibility of managing the Trust on your behalf.
It’s a good idea to name substitute trustees, to replace a trustee should anything happen to them.
In What Situations Might I Want a Trust?
A Trust can include any wishes about how your estate should be handled by the trustee, and you are able to express more complex wishes in how you’d like your estate to be managed.
Case One
Heather and Mark have 2 young children. Heather is lucky enough to be very comfortable thanks to her career, and wants to make sure that she’s able to finance important aspects of her children’s futures, including money for studies, driving lessons, and helping them get onto the property ladder when they’re old enough.
Heather later finds out that she’s ill, and her concerns for her children’s future come to a head. She’s worried that when she dies all of her assets will automatically pass to Mark under the UK’s rule of intestacy, and become part of his estate. As they’re only a young couple, Heather knows there’s a chance that Mark might re-marry. This, in turn, would mean that all of the money that Heather had saved for her children could end up being passed directly to someone else in the future, effectively disinheriting her children from the line of inheritance.
How Would a Trust Help Heather?
If Heather places the portion of her assets she’s set aside for her children into a Trust, it’ll be saved for them specifically and won’t automatically pass to Mark under the UK’s rule of intestacy. Whether Mark marries again or not, the money in the Trust will only ever be accessible to the children, just as Heather wanted.
Case Two
Derek is a widower with 2 grown up children. He’s writing his Will in order to ensure that his children receive what he wishes them to after he dies, including property he owns and a share of his capital. However, one of Derek’s children, Alice, is married to a man that Derek doesn’t trust or even like. Derek’s worried that, should Alice and her husband get divorced after Derek dies, her husband will receive part of Derek’s assets in a divorce settlement.
After Derek’s death, Alice receives a house from his Will along with some money. Alice later does get divorced and ends up having to split her assets with her ex-husband. She sells the house and splits the money from the sale with her ex-husband – she doesn’t benefit from the nest egg that Derek intended to leave for her.
How Would a Trust Help Derek?
In order to ensure that Alice’s husband doesn’t get access to the assets that Derek left her, Derek could put the property and money into a Trust and name his grandchildren as beneficiaries. The Trust could name Alice as a life tenant of the house, which would guarantee that she and her children could live there for the duration of her life, or rent it out and benefit from the income. When Alice died, the house wouldn’t form part of her estate so this would protect it from being inherited by her husband, as it would technically belong to their children.
The Trusts we offer are an optional addition to our Bespoke Will service. Click here to find out more about Bespoke Wills.
Questions
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This document supports the Trust Deed and outlines your wishes for the assets placed within the Trust. Although not legally binding, it gives guidance to the trustees on how you’d like your Trust to be executed on your behalf. You can update this as often as you want without having to amend the Trust Deed itself.
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When the beneficiary of a Trust dies, the Trust is then “wound-up”. When creating your Trust Deed, you should name back-up beneficiaries to inherit any assets which remain in the fund if the original beneficiary dies. This can be family, friends or even charities.
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It depends on the type of Trust. If the Trust Deed states that they can’t access funds before a certain age, or must meet a set of requirements, then it’s unlikely that assets will be released early without very good reason.
If the Deed states that the beneficiary can have discretionary access to the Trust at any time, then the beneficiary will need to formally petition the trustee. The trustee then decides whether to release the funds.
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It depends on the type of Trust. Some types of Trusts are tax exempt, or are only subject to charges if they’re over a certain value. There are three main tax implications to consider when creating your Trust, including:
- Income Tax
- Capital Gains Tax
- Inheritance Tax
To find out more about how taxes can affect you, and how to protect your funds as much as possible, just get in touch.
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No, you can also put companies, stocks and other valuable assets into a Trust. It’s not limited to money and property.
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With so many types of Trusts available, it’s difficult to know where to start. That’s why we’re here to listen to your personal circumstances and wishes – then, we can guide you towards the best Trust for you. With so many complexities, you need to seek the advice of a specialist to avoid any unwanted issues.
Assets
Things of value you have in your possession, which are able to be passed on to another person.
Beneficiary
A person who receives money or other benefits from a Will or Trust.
Dependant
A person who relies on another as a primary source of income.
Estate
The sum of a person’s assets – legal rights, interests and entitlements to property of any kind – less all liabilities at that time.
Inheritance
Passing on private property, rights, and other assets upon the death of an individual.
Inheritance Tax
A tax on the estate (the property, money and possessions) of someone who’s died.
Intestacy
Government standard rules which apply when someone dies without leaving a valid will, which dictate who is able to inherit that person’s assets.
Public Documents
A document that is able to be accessed by anyone should they request it.
Settlor
The person or entity that establishes a trust.
Trustee
A person who is given the responsibility to manage assets that have been set aside in a trust for the benefit of someone else.
Will
A legal document that expresses how a person wishes their assets to be distributed after their death.