Trust Wills

What is a Trust Will?
A Trust Will is a type of Will which includes additional provisions which confirm the type of Trust which must be set after the testator (the person making the Will) dies. Trusts are used for many reasons but mostly to safeguard assets, allowing beneficiaries to live in property without inheriting it, protecting young or vulnerable beneficiaries or to maximise tax relief.

The main advantage is flexibility. If a client set up a Trust during their lifetime, rather than include the terms of the Trust in their Will, they would relinquish control of the assets immediately. This could restrict them from moving house (if the Trust relates to property).

What Types of Trust Wills are available?

  • Discretionary Trust – where the trustees have wide discretion as to when and how payments are made from the Trust Fund.
  • Vulnerable Persons Trust – where a beneficiary cannot, or should not, receive their inheritance directly but should have it managed on their behalf by a trustee.
  • Right of Residency/Occupation – where property is owned by one person and they want to allow someone else (usually their partner) to live in the property for life. 
  • Life Interest Trust – the most popular Trust Will we draft and usually relates to the family home, potentially offering some protection against care home fees.

Life Interest Trust Will
Most couples will make a Will gifting their Estate (including their property) to each other and then to their children as a default. This is an acceptable way to make your Will, but it does not include protection for the property against future issues; such as bankruptcy, remarriage or potential social care. An alternative to the standard Mirror Will is to make a Trust Will which includes a Life Interest Trust offering some protection to the property.

For this type of Trust Will, the couple making the Will must own their property as tenants in common (where they jointly own the property but both own 50% each, rather than collectively own 100% as joint tenants). If owned as joint tenants then the law dictates that the survivor will inherit their partner’s share of the property, regardless of what their Will says. We therefore change the ownership to tenants in common so each owner can include their 50% share of the property in their Trust Will.

The client can then specify that their 50% share is to be held for their children, whilst allowing the surviving spouse to continue to live in the property until they die. This effectively ring fences their share of the property, protecting it for the intended beneficiary. For example, if the surviving spouse was to remarry, they would not be able to give the assets away. Similarly, if the surviving spouse was to need long-term care, the deceased’s 50% share of the property cannot, under current legislation, be taken into account as an asset of the surviving spouse.

However, whilst these Trust Wills protect assets for the intended beneficiaries, it is important to note that the surviving spouse is protected under the Trust Will. They cannot be forced to leave the property, the property cannot be sold without their consent and the Trust does not end until they also pass away.

Are there any disadvantages to making a Trust Will?
There are formalities required in transferring the assets when the terms of the Trust Will come into force. The Trust contained in the Will would need to be set up after you pass away, which would incur a cost to the Estate. Alexander Legal Services can assist the Estate in setting the Trust up but clients need to be aware that the Trust contained in their Will only takes effect when they pass away and the Estate set the Trust up. There is no immediate protection.

Cost
Alexander Legal Services charges:

  • £320 for a Mirror Trust Will (a Trust Will for couples); or

  • £270 for a Single Trust Will (a Trust Will for one person).