Will trusts are mainly used by married couples and civil partners. They are set up in conjunction with splitting ownership of the family home, to ‘tenants in common’, so each partner owns 50% of the house. The typical arrangement is a joint tenancy. Rather than leaving this to each other, they leave it to a trust, which comes into force on the death of the first partner.
Circumstances, where trusts are used in conjunction with a will:
to provide for a husband or wife after death while protecting the interests of any children; this can be particularly important for families where there are children from previous marriages;
if you are a couple and own your property jointly;
to protect the inheritance of young children until they are old enough to take responsibility for their own affairs;
if you are an unmarried couple with significant estates, you can use a trust to help reduce your inheritance tax liability;
to provide for vulnerable relatives who are unlikely to be able to look after their own affairs;
to help succession planning in a family business.
A will trust is created when the testator leaves instructions in his/her will for part of their estate to be placed in trust. The will sets out the detailed terms of the trust, which only commences after the testator has died.
Will trusts and long-term care
If you use a will trust and your partner dies, you as the surviving spouse retain a right to live in the house. If you need to pay for care, only your share is assessed by the local authority.
The part owned by the trust is not counted. In this way it’s protected from care home costs. Government rules (Charging for Residential Accommodation Guide) suggest that this arrangement will not be contested as ‘deliberate deprivation’, meaning that you have deliberately split your assets to avoid paying high care-home fees.
Will trusts and inheritance
A will trust can help avoid ‘sideways disinheritance’*. This occurs when the first partner dies, leaving children from the marriage who might reasonably expect to inherit some of the family estate in due course.
If the surviving partner remarries and fails to make provision for their children in a new will, there’s a risk that everything will go to their new spouse.
Will trusts and disabled beneficiaries
If you leave money to a disabled person directly, in the form of a gift in your will, it can affect any means-tested benefits they may be entitled to.
If your loved one is vulnerable, they may be taken advantage of financially. If they have any capacity issues, they may have difficulty managing money and be unable to operate a bank account.
Using a trust in your will can enable you to look after the disabled beneficiary in the future and overcome these barriers.
Do you think a will trust is for you?
Setting up a trust may be suitable in light of your own personal and financial circumstances, whether this be something that is written into your will or as a separate trust.
For a no obligation, confidential discussion to see if we can help you, call 01257 260011 and speak with one of our Barrister Intermediaries.
*Based on our understanding of current legislation and the CRAG guidance.