Wills and Trusts can be very useful in estate planning and providing for your loved ones.
A Will sets out who you want to benefit from your estate after your death. There are different types of Trust that can be set up, with some taking effect after death, but some that can be created during your lifetime.
There are often tax advantages to creating a trust and you should take expert legal advice to ensure that you are putting the most beneficial structure in place. A trust can be a useful way of protecting assets from being spent where you might not want, for example, being lost in a divorce or bankruptcy, being used for care home fees or being left to others outside of the family.
Wills
You will use your Will to specify whom you want to inherit your assets once you die and in what shares. It will appoint executors to administer your estate and you can also appoint guardians for any minor or dependent children.
Trusts
You can set up a Trust during your lifetime or at the time of your death, by leaving instructions in your Will. Assets, such as money or property, are put into the Trust and Trustees are appointed to deal with the administration and distribution of the funds.
There are a number of different types of trust, including the following:
A life interest trust
This is often set up in a Will to leave a spouse a life interest in a shared home. This means that they can live there as long as they want, but ultimately your share of the home will pass to your choice of beneficiary. This protects your interest in the property from being used to pay for care home fees or from being left to someone else in the future.
Discretionary trust
This gives Trustees the discretion to decide when and how much to pay out to the beneficiaries. By way of example, a trust could be set up to benefit grandchildren. You could give the trustees instructions as to the types of expenditure they should allow, such as payment for education, trips or a car when they are old enough.
Which should I use, a Will or a Trust?
Everyone should have a Will, otherwise their estate will be distributed in accordance with the Rules of Intestacy, which could mean that some of their loved ones inherit nothing.
Whether or not you would benefit from setting up a trust depends on your individual circumstances. In some cases, it can legitimately reduce the amount of Inheritance Tax payable by your estate.
You can also use a trust to stop children from inheriting a large amount of money at a relatively young age when it might be more likely to be squandered.
If you are considering setting up a trust, it is recommended that you take expert advice so that your estate planning is advantageous for both your beneficiaries and your estate’s financial position.
Want to learn more about the difference between a Will and a Trust?
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