Trusts and will trusts
You can leave gifts in your will either outright to named beneficiaries or in trust. An outright (or absolute) gift passes directly to the intended recipient and is then theirs to do with as they wish. By contrast, a gift in trust means that the gift is held by your trustees and is in their control.
A trust is a way of separating the ownership of an asset from the right to benefit from it. For example, if some investments are held on trust, the trustees will be the people with the legal ownership of the investments, while the beneficiaries will be the people who have the right to the income from the investments.
How a particular trust functions will be determined by the content of the trust document. In the case of a will, the will itself is the trust document.
This document can determine how long the trust will last, the amount of control the trustees will have over the trust property, and the method by which the assets can be passed to the beneficiaries. Our page What is a will trust? explains how trusts work in more detail, as well as the ongoing duties of the trustees. We also clear up any confusion raised by the question Testamentary trust or will trust?
The advantages to using trusts
The main reason a trust may be useful is that it lets someone benefit from an asset without having control over it. This could be useful in a variety of situations:
- if the person you want to benefit is under the age of 18, so they are unable to own the property themselves;
- if you think the person you want to give the assets to will not be able to manage them properly;
- if you want to create a life interest in an asset;
- to reduce your inheritance tax liability;
- to protect a family home from being sold to pay for residential care.
Each of these options is fully explained in our When you should create a will trust page. There are lots of different types of trust that can be used depending on the intended purpose of the trust. For example, some trusts act only as a way of holding assets until they can be received by beneficiaries, while others give a greater degree of control to the trustees to manage the trust assets or decide how they are distributed. Our Types of trust page goes through a number of the different kinds of trust, and explains when they may be of use to you.
Select an article:
What is a will trust?
A will trust is any trust created by your will that comes into effect on your death
Testamentary trust or will trust?
Testamentary trust is an older, more formal term for a will trust
When you should create a will trust
Use will trusts to help preserve your property and look after your heirs
Difference between executor and trustee
Executors and trustees have different duties and responsibilities even if they are the same people
Types of trust
Your will can create a number of different types of trust for a variety of purposes
Under a bare trust, the beneficiary becomes absolutely entitled to the trust assets at the age of 18
Life interest trust
A life interest trust benefits one beneficiary for their lifetime only
Discretionary will trust
A discretionary will trust allows trustees to decide how to distribute your estate to your beneficiaries
Bereaved minor's trust
A bereaved minor’s trust is created for a child under 18, at least one of whose parents has died
Disabled person's trust
A disabled person’s trust provides for someone suffering from a mental or severe physical disability
18 to 25 trust
An 18 to 25 trust delays children’s entitlement to their inheritance, which qualifies for special inheritance tax treatment