The increasing use of Wills to create Trusts
Today, at S Bish Estate Planning, we look at how Wills are increasingly being used to create trusts to benefit loved ones after someone’s death. We ask why you might want to leave money in trust and how this is handled.
Trusts can be 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.
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, if you feel that your child will be better able to manage an inheritance later on.
Leaving money in a discretionary trust to a group of individuals so that 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, such as education, a car or a deposit for a home.
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. This means that they will be able to live there for as long as they want. They will not be able to leave your share to anyone in their Will however, nor will they be able to sell the property and use the money from your share themselves. This means that it is protected against loss, for example, if the other person were to re-marry, make a bad investment or need residential care in later life.
To leave the benefit of money or property to beneficiaries but keep it safe 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.
Leaving the benefit of money to someone who is unable to manage their own affairs or who is likely to spend the money unwisely. The trustees will control the funds and ensure that it is only released when they believe it is appropriate to do so.
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. It also gives you the opportunity of setting out in a letter to the trustees how you would like the money to be used. This can prevent funds from being frittered away or spent where you would not want them to be.
It is also open to you to 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 and the wishes you have for it.
If you would like to speak to one of our Wills and Trusts experts, call us on 01727 220930 or email us at email@example.com