A number of different types of trust can be created by will. The main ones, which are used most frequently, are summarised below.
If you leave your estate absolutely to your children or grandchildren (i.e. you do not stipulate that they have to attain a certain age to receive their entitlement) and any of them are under 18 when you die, your will can create a bare trust for them. The child will become absolutely entitled to the assets within the bare trust when they reach 18 which means that they will be able to do what they want with them at this time. Until the child reaches 18, the trustees have no active powers except the duty to hold the legal title to the trust assets and invest them appropriately. Before the child reaches 18, both capital and income from the trust can be used for the child’s benefit. See Bare trust.
If you establish a life interest trust in your will, you can choose a beneficiary (called the life tenant) who will be provided with the right to receive the income from the trust. This right is usually given for their lifetime, and on their death, the trust fund can pass to other beneficiaries named in your will. See Life interest trust.
A discretionary trust is the most flexible sort of trust that you can create in your will but it also has the highest inheritance tax charge attached to it. You may be prepared to pay the extra tax in order to maintain flexibility and allow your trustees to distribute your estate depending on the particular circumstances of your beneficiaries when the time comes. You can, of course, leave your trustees guidance as to how you would them to use the assets but they will not be bound by any of your requests. That said, if you have chosen your executors and trustees carefully, they are likely to follow your wishes. See Discretionary will trust.
A bereaved minor’s trust is a will trust that is created for a child under 18, at least one of whose parents has died. Under such a trust the child needs to become absolutely entitled to the trust property on or before they reach the age of 18.
A bereaved minor’s trust benefits from favourable inheritance tax treatment. It is not automatically created if you simply leave your estate outright to your children. If you do this, a bare trust arrangement could be established. Instead, your will needs to state that your estate should pass to such of your children as survive you and attain the age of 18. See Bereaved minor’s trust.
If you want someone to benefit under your will who suffers from a mental or severe physical disability, you may wish to include a trust which qualifies as a disabled person’s trust. This sort of trust attracts a favourable tax treatment if it meets certain conditions. See Disabled person’s trust.
If you would prefer to delay your children’s entitlement to their inheritance beyond the age of 18, an 18 to 25 trust may be appropriate. This sort of trust is subject to less inheritance tax than, say, a discretionary trust but the beneficiary needs to become entitled to the capital in the trust by the age of 25. See 18 to 25 trust.