A will trust can sound pretty daunting, even just the thought of trying to get your head around what they actually are can tire you out. But you’ll be pleased to know that will trusts aren’t all that complicated.
Here, we speak to James Antoniou, head of wills at Co-op Legal Services, the largest regulated provider of wills, estate planning and probate services in the UK, to find out everything you need to know about will trusts.
What is a will trust?
A trust is a legal arrangement where one or more people (the ‘trustees’) look after money, property or other assets on behalf of another person or people (the ‘beneficiary’ or ‘beneficiaries’). A trust can be set up in a person’s will so that it comes into effect when they die. This is known as a ‘will trust’.
Leaving a property in a will trust
A will-maker may want to leave a particular asset they own, such as a house (or their share of it), to the will trust that they’ve included in their will. This would mean that, upon the will-maker’s death, the ownership of the house would be transferred to the trustees to manage in accordance with the terms of the trust.
A simple example would be where the will-maker wants their children to inherit their house, but initially, they want to allow their spouse to be able to live in the house for the rest of their life. In this scenario, upon the will-maker’s death, the house ownership would be transferred to the trustees. The trustees would legally own the property but they would allow the spouse to live there for the rest of the life. Upon the spouse’s death, the trustees would then transfer the legal ownership of the house to the children.
If the will-maker had simply given their house in their will to their surviving spouse, it is possible that the surviving spouse may re-marry in future and potentially leave the house to someone other than the original will-maker’s children. Or they could incur a significant debt from care home fees or equity release which means that the house must be sold, denying the children their inheritance. This can be avoided by using a will trust.
What are the pros and cons of a will trust?
Will trusts are a fantastic way to preserve and protect assets for future generations. They are most commonly seen in the following circumstances:
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You wish to protect your estate against possible care fees in the future
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You have a spouse or partner but children from a previous relationship
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You wish to leave some of your estate to a vulnerable or disabled person
Wills that contain trusts are more complicated and therefore are more expensive than standard wills. There are also potential future costs of managing the trust that need to be considered. However, the benefit of having the right will trust in the right circumstances normally far outweighs the additional cost involved.
What’s a discretionary trust will?
A discretionary trust will is when money or other assets from the will-maker’s estate are left to a will trust but the trustees are given the power to decide which people become beneficiaries and when and how they should receive any inheritance.
This may sound a strange thing to do on the face of it, but there are many reasons why this may be a good idea. If one of their children has a problem with alcohol or with drugs, is very bad with money or has gambling problem, this would probably make them reluctant to leave the child a significant amount of money. Whilst they may not be ‘on the straight and narrow’ now, this doesn’t mean they won’t be in the future and this type of trust allows the will-maker to effectively ‘defer’ their rights to the assets until the trustees feel it is appropriate.
Is a will trust a good idea?
Yes, in the right circumstances. They are complex arrangements which require very specific drafting so we would always recommend that legal advice is received from a regulated professional service, such as Co-op Legal Services, so that an informed decision can be made.