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How creating a trust in your will could help to ensure your loved ones received the inheritance they deserve

3rd August 2018

Deciding who will benefit from your money and property when you die requires careful thought, particularly where you have a big family with differing levels of need and some are too young or financially inexperienced to deal with a sudden influx of cash.

This is where the creation of a trust in your will may help, as it provides you with an opportunity to delay and control the passing on of money and property. And, as Stephen Myers, wills, trusts and estate planning solicitor with Myers & Co Solicitors in Stoke on Trent explains, the good news is that if planned properly it can also help to minimise inheritance tax where the total value of what you hope to pass on will exceed £325,000.

What is a trust?

A trust is a legal device which means that rather than giving money or property directly to the intended beneficiaries, you instead entrust it to people of your choosing who will look after it on the beneficiaries’ behalf and only let them have access to it in certain circumstances, which you can prescribe.

By including a trust in your will, it is possible for you to ring-fence inheritance monies for certain purposes.  For example:

• to fund your children’s education or to help with the cost of a house deposit;
• to care for a relative with mental health problems or some other form of illness or disability; or
• if you have married for a second time, to ensure that the family home goes to your children once your new spouse has died.

It is also possible to make substantial inheritance tax savings because, if done properly, money and property put into a trust will not usually be taken into account when calculating the value of your estate for inheritance tax purposes.

Are all trusts the same?

There are four broad categories of trust that are commonly used in wills, all of which are different:

• a bare trust, under which the beneficiaries have an immediate right to the money or assets held in the trust, together with any income generated, as soon as they reach 18;
• an interest-in-possession trust, under which the income or any other benefit generated by the trust must be paid over to named beneficiaries while they are alive, and then passed on to other named beneficiaries (for example, their children) when they die;
• a discretionary trust, under which the trustees have discretion as to when and how any income generated by the trust is allocated to the beneficiaries; and
• a charitable trust, under which income generated by the trust is paid over to named charities.

Your solicitor will consider your circumstances and advise you on which type of trust best suits your needs.  For example, it might be that you want to benefit your children and grandchildren but you want to ensure that those most in need receive the biggest portion and that a financially careless child only receives access to limited amounts of money each year.  In this case a discretionary trust is likely to be appropriate as it will allow your trustees to make decisions based on need and merit.

Our team of experienced trusts lawyers will help to establish a trust to achieve your desired aims.  They can also work alongside your trustees once the trust is up and running to assist in the decision-making process and to help resolve any disagreements that may arise.

To find out more about how creating a trust in your will could help to safeguard the inheritance of your loved ones, please contact Stephen Myers on 01782 525007 or email stephen.myers@myerssolicitors.co.uk.

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.