A will often creates one or more trusts in order to give effect to its provisions. It is not essential to do so, but it is very common; and sometimes it is the only way that certain purposes can be achieved.
If a will does create a trust, it could be for:
There will then be reference in the will to the ‘trustees’. In the normal course of events the people appointed as executors will also be the trustees.
If the will creates a trust of the whole estate, or the residuary estate, then the residuary estate is usually referred to as the trust fund. Please see Will trusts for further information.
One of the principal reasons for creating trusts in a will is to ensure that some control is exercised over family assets.
For example, by placing property or assets in trust, you can ensure that it is not disposed of completely, but continues to be invested or used to generate income and provide for the beneficiaries.
You may want to prevent someone from receiving part of their inheritance – or the whole of it – until they have reached a certain age. Typically, this might be 21 or 25 – perhaps when most of their studies are behind them.
You could do this by providing in your will that the inheritance, whatever it may be, is to be on trust for the beneficiary until they have reached that age. Often you can also provide for the beneficiary to receive an income from the trust – such as interest on investments or income from rented property – until they have reached the specified age.
As a rule, inheritance tax of 40% is payable on anything over £325,000 of the value of your estate. But both the amount of the estate that is taxable, and the rate of tax payable, can be more advantageously planned by putting property in trust.
There are a number of exceptions to this, and it can be quite a job to plan; so it is best to have specialist professional advice, especially if your estate is large or complicated. For further information, please see Inheritance tax.
You may wish to give a life interest to your partner, and then have your estate pass intact to some other beneficiaries.
Typically this might be if you are in a second or subsequent marriage. On your death you might wish your spouse to be able to continue living in the family home for their lifetime, and afterwards for the home to go to your children from a previous marriage.
A life interest will trust puts the house on trust for your spouse for their lifetime, and then for the children. Your spouse would not be able to dispose of the property (except perhaps to buy an alternative home, which would itself then be on trust).
It is a worry to people that after they have died, their partner may have to sell their family home in order to pay the costs of residential care; and it is often thought that this can be prevented by using the will to put the property in trust.
However, it isn’t necessarily quite as simple as that. It may depend on whether the property was jointly owned as joint tenants or tenants in common. If you were tenants in common (i.e. each had a defined share) then you can leave your own share on trust for a surviving spouse or civil partner for their life, reverting to some other beneficiaries afterwards. A sale of the property could not then be forced.
If you want to use your will to minimise the possibility of your house being sold for care home fees, you should seek specialist professional advice.