Trusts

Will Based Trusts

Protecting Family Inheritance

Is a Will Based Trust right for me?

In simple terms a trust is a means of giving someone else a benefit of something but without actually giving it to them so it is kept safe. This could be giving your spouse a right to live in your property but ultimately making sure it passes to your children.

There are a variety of will based trusts available to protect your hard-earned assets. Whether your goal is protection for your family (or even from your family!), from external threats, or tax mitigation, there’s a suitable trust for you. You can trust in Nene Legal to advise you whether a trust is right for you.

What can Nene Legal provide?

We can include any or all of the following trusts in your Will ready to be set up at probate. These can be included in a single will or mirror wills:

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This type of trust will help you protect your family home, or other property like buy-to-lets.

We will include this in your Will to make sure your spouse or other chosen beneficiary can continue to occupy it or receive an income from it, all while safely protecting it from threats. It can protect your share of the property from:

  • Sideways disinheritance – The property passing to a new spouse or step children
  • Care home assessment of the survivor
  • Bankruptcy of the survivor
  • Divorce

It can also be limited to simply giving a person a right to live in your property after your death for a short time. This is known as a ‘Right to Occupy Trust’.

See our PPT page for more information or contact one of our Consultant’s to see how the Property Protection Trust can benefit you.

Discretionary trusts are incredibly flexible.

They have many benefits both for protection and inheritance tax (IHT) planning. In simple terms they work by leaving assets in the control of your Trustees. You name a group of people, and this can be anyone, who you would like to benefit from your assets. As the Trustees have control, they will decide who benefits, how much, and how often. For example, they may decide to give one of your children £10,000 towards their first home, and another £15,000 to start their business.

These trusts also protect from all of the threats mentioned above. There is also the added benefit of keeping the assets outside of your beneficiaries’ estates so no tax liability is created for them.

We recommend you give your Trustees some guidance on how you want them to manage the trust. This can be done in the form of a ‘Letter of Wishes’, which we can advise on and produce for you. The Trustees should try to follow this letter as closely as they can. You can update these wishes at any time without needing to rewrite your will, so don’t worry if you change your mind.
If you have a child or someone else you want to provide for who is disabled in some way you may be worried about how you can ensure their needs are met in the most effective way after you are gone. Leaving something to them directly can cause problems if they are in receipt of means tested benefits, or if they aren’t mentally capable of managing an inheritance themselves. The Vulnerable Person’s Trust is there for you in this situation.

It works similarly to the Discretionary Trust with one key difference; the fund MUST be used for the benefit of the vulnerable person.

For this trust to be appropriate the vulnerable beneficiary must meet some strict criteria set out by statute. At Nene Legal we can work with you can make sure that this type of trust is appropriate and confirm whether your loved one will qualify. We’ll confidently advise you on the benefits of this trust and make sure the necessary wording is included in your Will.
As the name suggests, this is THE most flexible variety of trust we can include in your Will. This trust combines many of the benefits of the Property Protection Trust with those of the Discretionary Trust.

It offers great protection for your spouse and your children, and even generations going forward as it can last for up to 125 years. That’s 125 years that your assets can potentially be protected for, for the benefit of your loved ones and their descendants.

This trust protects your estate for your spouse for the rest of their life, and then carries on protecting your estate for your descendants going forward. Your estate can be kept safe from sideways disinheritance, creditors, care fees and more all while flexibly providing for your family.

There are also various Inheritance Tax benefits of the FLIT which we can advise on once we know more about your own finances and circumstances.

Any trust and Inheritance Tax planning we do for you at Nene Legal must be bespoke to you and your estate. There’s no ‘one size fits all’ when it comes to estate planning so please get in touch with us for a chat about how these trusts can help you.

Protecting family Inheritance

Will trusts allow you to pass on your property within a trust structure – which can have a significant impact on your estate.

A will trust – also known as a testamentary trust – is created within your will to allow you to protect property you hope to pass on to your family.

Will trusts are mainly used by married couples and civil partners and are set up in conjunction with splitting ownership of the family home, to ‘tenants in common’, so each partner has 50%. Rather than leaving this to each other, they leave it to a trust, which comes into being on the death of the first partner.

Until recently, nil-rate band will trusts were a common way of saving inheritance tax (IHT). A couple potentially liable could split their estate into halves, both below the nil-rate band.

However, since 2007 the ability to transfer unused IHT allowance ended the need to make this type of will trust for most couples, although they still ring fence assets against potential fees should you or your partner go into long-term care.

Another reason for setting up a will trust is to 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 instead.

A will trust uses up some or all of the first partner’s IHT nil-rate band in a way that leaving everything to your partner doesn’t. It could also create a capital gains tax (CGT) liability for trustees.

Will trusts are mainly used by married couples and civil partners and are set up in conjunction with splitting ownership of the family home, to ‘tenants in common’, so each partner has 50%. Rather than leaving this to each other, they leave it to a trust, which comes into being on the death of the first partner.

Until recently, nil-rate band will trusts were a common way of saving inheritance tax (IHT). A couple potentially liable could split their estate into halves, both below the nil-rate band.

However, since 2007 the ability to transfer unused IHT allowance ended the need to make this type of will trust for most couples, although they still ring fence assets against potential fees should you or your partner go into long-term care.

FAQs

A will trust is a legal arrangement where you leave some or all of your assets to ‘Trustees’ , who you choose, for them to hold onto and make sure they are protected for the people who you want to benefit from your assets. Instead of your assets passing on to your beneficiaries themselves, this allows them to be protected and used for their benefit.

There are lots of different reasons for using will based trusts, and we would discuss your requirements in detail before recommending one. Some main reasons are to protect your family home in case your spouse remarries after your death or needs residential care, or to make sure your assets definitely pass on to your own children. Will trusts can also be used for inheritance tax planning, or passing assets down your bloodline.

A Property Protection Trust (PPT) is a special type of trust we can include in your will to protect your family home. This type of trust is designed for you to allow your spouse or partner to continue living in the home after you have passed away, but without giving it to them. This makes sure that your home, or your share of it, is protected for your children (or other beneficiaries of your choosing) should anything happen to your spouse or should they become vulnerable after you’re gone. Importantly, it also makes sure your spouse is looked after too. You can read more about PPTs here.

If you die with assets above your inheritance tax threshold your estate will be liable to tax at 40% on everything above your threshold. If you die leaving all of your estate to your spouse or civil partner you will not pay any inheritance tax as there is a ‘spouse exemption’. There are some will based trusts that can take advantage of this spouse exemption while also protecting your assets.

Trusts may also help with inheritance tax planning for other beneficiaries. Assets left to a discretionary trust won’t belong to any of your beneficiaries, which also means they won’t be taxed when any of the beneficiaries die. This can be really useful for inheritance tax planning for unmarried couples, and also where you want to leave assets to a person who may already be well off in their own right without increasing their tax liability.

Most of what you own can be placed in trust. This includes your family home, any investment properties, savings and bank accounts, even your business assets. Different types of trust are more useful for protecting certain types of asset, but we can guide you on that.

If you have minor children you’re probably concerned about how you can best provide for them if you were to pass away. There are simple trusts available to help you provide for your children via your will, giving you peace of mind. If you leave assets to children who are under 18 when you die then their inheritance will be held back and protected by your Trustees until the children turn 18.

If 18 feels like too soon for your children to inherit, we can also extend the trust protection until they turn 25.

A Trustee is someone who you choose to take control of any assets you leave on trust upon your death. Their job is to manage any trusts and make sure that your assets are protected, and most importantly used to benefit the people who you have named as beneficiaries of any trust. Trustees can be either people who you know and trust like your spouse or other family members or friends. You can also choose to appoint a professional trustee like a solicitor, but this will incur fees.

We will advise you on whether a trust is appropriate. If you choose to include a trust in your will we will then ensure that the correct legal wording is included in your will so the trust can be created after you pass away. Once your will is signed you won’t personally need to do anything else in relation to the trust. Once you pass away the people managing your estate (your executors) will need to make sure that the trust is properly set up. This is part of the probate process.

Speak to our specialist team

Our will writing team is based in Rushden, Northamptonshire. We offer our will writing service in the Northamptonshire, Cambridgeshire and Bedfordshire areas.​.