Setting up a Will trust can make sure your loved ones are provided for in the future and protect your estate from unnecessary inheritance tax.
Find out more below or contact the team directly to find out more.
What is a Will trust?
Will trusts – sometimes known as testamentary trusts – are trusts that you create as part of your Will to protect the assets you pass on when you die. Unlike lifetime trusts, Will trusts only come into effect after your death.
Setting up a Will trust can be better than passing on assets normally in a variety of situations. You might use a Will trust to:
- Pass on assets to both a current partner and children from a previous relationship
- Protect family assets if your partner remarries after you die
- Provide for grandchildren in case their parents remarry
- Protect assets for young or vulnerable beneficiaries
- Prevent beneficiaries from losing state benefit entitlements
- Minimise inheritance tax
- Maintain assets for multiple generations.
Our team includes solicitors specialising in both Wills and trusts, as well as inheritance tax and wealth structuring experts. We can help you set up a Will trust that will provide the very best protection for your assets, whatever your requirements.
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Who can be the beneficiary of a Will trust?
Anyone can be a beneficiary. They might be:
- A named individual
- A class of people, such as “my grandchildren and their descendants”
- A charity, or a number of charities
- Any other organisation, such a as a company or sports club
It’s possible for people who haven’t yet been born to be beneficiaries – this allows you to plan for future grandchildren and other descendants.
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Can a trustee be a beneficiary too?
Yes – but it’s usually best practice to have at least one non-beneficiary trustee, especially if significant discretions are given to trustees in the terms of the trust.
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What can a Will trust be used for?
Will trusts can be tailored to meet the particular needs of you and your estate. Some uses might include:
- Provide income or property for your second spouse during their lifetime, ensuring the assets then pass to the children from your first marriage after their death
- Fund education for your children and grandchildren
- Provide for vulnerable loved ones
We’ll be able to advise on the best way to set up a trust to benefit those you want to pass on your wealth to.
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How can a Will trust be beneficial in estate planning?
Will trusts can be very valuable to effective estate planning. They can help you:
- Minimise inheritance tax and take advantage of available tax relief
- Make sure beneficiaries’ access to benefits or state support isn’t affected by their inheritance
- Protect your assets from creditors or divorcing partners.
They can also help you take advantage of inheritance tax relief due to your partner if they survive you. By planning ahead with a will trust, you can:
- Take advantage of inheritance tax business or agricultural relief, which otherwise might not be available after both you and your spouse have died
- Put assets outside your spouse’s ownership that are expected to increase in value and attract more tax (for example, land with development potential)
- Discount the taxable value of your family home by splitting ownership between a surviving spouse and a trust
- Get extra inheritance tax allowances if either you or your spouse (or both) have previously been widowed.
We’ll be able to advise you on how a will trust can benefit your estate.
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Are there different types of Will trusts?
There are a number of different types of trusts, each having different benefits and being suited to different situations. Which trust type is right for you depends on:
- Who your beneficiaries are (and whether or not they’re minors)
- Whether you want to specify exactly what each beneficiary gets, or give trustees discretion over this
- What you want to achieve through the trust
- How complex your estate is as a whole, and how the trust will affect other aspects of it for tax purposes
We work with you to understand your goals in estate planning and offer advice that’s tailored to you and your family. No two estates are the same, and this is true of trusts as well.
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How are Will trusts taxed?
This is a complex area but there are several main areas of tax to be aware of when setting up a trust:
Capital gains tax
- Trustees are taxed at the higher rate (in 2018 this is 20% on most assets, 28% on residential property) and they only get half the tax-free annual allowance of individuals
- Transfers from the trust to a beneficiary incur capital gains tax
Income tax
- Beneficiaries pay income tax on any income from the trust
- If beneficiaries have no automatic right to income from the trust, trustees themselves may be subject to more income tax
The tax rules governing will trusts are very complicated, and for this reason it’s essential to have the experts on your side. We can advise you on the best structure for your trust to make sure it’s as tax-efficient as possible.
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When can a Will trust be set up?
You can write a will trust into your Will, to take effect after you die. There’s is usually a gap between the date of death and when the trust starts up – this is called the ‘period of administration.
Usually this will be a matter of months, although if the estate is particularly complicated and administration takes a long time, it could be years.
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How can Irwin Mitchell help?
We have unsurpassed experience in creating and administrating trusts. The services we offer include:
- Making your trust as tax efficient as possible
- Advising on any legal implications
- Keeping you up to date with relevant changes to tax laws
- Dealing with all aspects of compliance, such as completing the trust register
- Preparing and submitting tax returns
- Assessing ten year and exit charges
- Advising on altering trust structures when appropriate
We offer a comprehensive service, whatever the purpose or type of your trust.
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What happens to property left in trust in a Will?
When property is left in a trust in a Will, the management and distribution are determined by the terms listed in the trust document.
The structure of the trust will set out how much control a trustee has over the management of the property.
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Why choose Irwin Mitchell for this service?
We have a dedicated trust administration team who have considerable experience both setting up and managing trusts. As well as solicitors who are experts in all aspects of estate planning, we also have tax specialists and financial advisers, meaning we have everything you need in-house.
We hold membership to many professional bodies in this area, such as STEP (Society of Trust and Estate Practitioners), CIOT (Chartered Institute of Taxation), and CILEX (Chartered Institute of Legal Executives). We work with these bodies to help shape the law in this fast-moving area.
We have considerable experience in complex estates and frequently work with international and high net worth clients. Whatever your needs, we have the expertise to help you plan effectively.
We have offices located around the UK. If you can't visit one of our offices, we can meet you at an appropriate location or arrange phone or video calls.
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If you have any more questions or you would like to find out how our Will trusts solicitors can help you, contact our team today.
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Contact us to learn more about how our solicitors can help you set up and administer a discretionary trust.
