When discussing estate planning with clients, one of the most common comments we hear is, “We’ve got a trust in our Will.” But when asked what that trust is intended to do, the answer is often less clear.
That is understandable. Trusts can be complex and many people know they have one in their will, without fully understanding why it was included or what it is meant to achieve.
The important thing isn’t simply having a trust in your Will. It’s making sure it’s the right trust for your circumstances and that it continues to support the outcome you want for your family.
Different trusts have different purposes
There is no single type of “will trust”. A solicitor can draft your will with different trust arrangements depending on what you’re trying to achieve, and choosing the right one is an important part of the estate planning process.
For example, a bare trust gives the beneficiary an outright entitlement to the assets, even if they cannot access them until they reach the appropriate age.
A discretionary trust gives trustees the flexibility to decide who should benefit, when distributions should be made and how much should be paid. This can be useful where family circumstances may change or greater flexibility is needed.
A life interest trust allows one person, often a surviving spouse or civil partner, to benefit from assets during their lifetime while preserving the underlying capital for other beneficiaries. This can help balance looking after a partner with ensuring children ultimately inherit.
Other trusts may be appropriate in specific circumstances, such as where a beneficiary is vulnerable or unable to manage their own affairs. The right choice depends on what you want the trust to achieve.
Some of the most common misunderstandings
One topic that comes up regularly is the family home.
Clients often tell us that their share of the property passes into a trust when they die and assume that this means the property is protected from inheritance tax or from being included in any future care fee assessment.
Unfortunately, it’s rarely as straightforward as that.
Whether a trust achieves a particular outcome depends on the type of trust, how it has been drafted and the rules in place at the time. Care fee assessments are governed by separate legislation and depend on individual circumstances.
That doesn’t mean these trusts are not valuable. In many situations they are entirely appropriate. The key is understanding what the trust was intended to do, rather than expecting it to achieve something it was never designed for.
Another misconception is that once a Will has been written, it can be put away and forgotten. Families grow, relationships change, wealth changes and legislation evolves, all of which can affect whether your arrangements remain suitable.
A trust should evolve with your plans
Like most areas of financial planning, estate planning should be reviewed from time to time.
Reviewing your Will periodically gives you the opportunity to check that any trusts still reflect your wishes, your chosen trustees remain appropriate and the arrangements continue to work alongside your wider financial plan.
How Origen can help
Will trusts are legal arrangements and should always be drafted by a suitably qualified legal professional. Although Origen does not advise on drafting will trusts, we regularly help clients understand how estate planning fits alongside their wider financial objectives.
If you’re unsure why a trust was included in your Will, or it’s been some time since your arrangements were reviewed, it’s worth having a conversation. We can help you consider whether your plans still reflect your objectives and, where appropriate, work with your solicitor or other professional advisers to ensure everything continues to work together.
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