Will Trusts2018-10-28T21:29:17+00:00
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What is a Will Trust?

Will trusts allow you to pass on your property within a trust structure – which can have a significant impact on your estate.

A will trust – also known as a testamentary trust – is created within your will to allow you to protect property or assets you hope to pass on to your family.

Unlike a lifetime trust, a will trust will only take effect once you pass away.

Below are some of the most common Will Trusts

Protective Property Will Trust2018-10-26T16:55:45+00:00

A Protective Property Will Trust (PPWT) does what it says on the tin – it protects property!

It is a collection of clauses added to your Last Will and Testament to ensure that your share of your property is ultimately left to the people you choose, while also ensuring that a nominated person (known as the life tenant and usually your spouse/partner) can continue to benefit from the property and live in it for the remainder of their lives.

There are three main reasons for including a PPWT in your Will, and these are:

  1. To protect against care home fees
  2. To avoid sideways disinheritance, and protect your children’s inheritance
  3. To resolve disagreements on who should get what

1. To protect against care home fees

We probably all know a family that’s suffered at the hands of the most draconian tax of all, the Community Care Charge, which has eroded virtually all the value of the family home because one of the owners was taken into long-term care.

Firstly, it’s important to understand why homes are seized at all. Every year local authorities in England and Wales seize the homes of around 70,000 families to pay for care costs which can wipe out all but a few thousand of a person’s Estate. However, for the local authority to be able to do so, both of the following conditions must be met:

  • The person in care must be worth at least £23,250 (including the value of their home), and
  • They must own 100% of their property (excluding the mortgage)

So how can a Protective Property Will Trust prevent this from happening?

To effect a Protective Property Will Trust the property must be owned in JOINT names, BOTH owners must still be alive, AND the property must be owned on a Tenants-in-Common basis, as opposed to a Joint Tenancy basis.

By ensuring that neither party owns 100% of the property outright on the death of the first party the Protective Property Trust clauses in you Will state that the first person to die does not leave their share to the survivor. For the protection of the survivor it is specified that they have a “Life Interest” in the property allowing them to remain in the home until their death. It is even possible for the surviving party to move home with the terms of the Trust. This arrangement means that the survivor only owns 50% of the property and, as a result, the local authority cannot seize the deceased person’s share.

The most important aspect here is that the revised ownership arrangements, and the Will incorporating the Protective Property Trust, must be carried out PRIOR to either of the owners losing mental capacity. Once an owner has lost mental capacity it is too late to effect this measure of protection!

The current cost of long-term care

If you’ve not already thought about what could happen to your home if either you or your spouse/partner have to go into care the current cost of long-term care is likely to be quite shocking. The harsh reality is that the value of your family home can be dramatically reduced by Community Care Charges for long-term nursing and residential care home fees. Currently, nursing home care in England and Wales costs in the region of £750 a week (almost £40,000 annually), and with an average stay in care of about 4-years, the total erosion of the family home could be nearly £160,000.

It’s interesting to note that the cost of setting-up a Protective Property Trust in your Will, including changing the property ownership from Joint Tenancy to Tenants-in-Common at HM Land Registry, is probably less than half of one week’s nursing home fees, and probably totally insignificant in comparison with the savings your Estate could well make!

2. To avoid sideways disinheritance

Many families these days include children from more than one relationship, perhaps because they have remarried. Even if your family structure does not already include a child (or children) from a previous relationship there is a danger that in the event of the death of either one of you, the survivor may remarry, which could create a situation where not all of your children will be catered for, and may be unfairly disinherited.

To understand this important aspect more clearly, let’s consider the following example:

  • Alan marries Nora
  • Both have been married previously
  • Alan has two children from his first marriage (Ben and Charlotte)
  • Nora has one child from her first marriage (Paul)
  • Since their marriage Alan and Nora have had a child together (Wanda)

Alan and Nora are happily married and when making their Will, as is usual, leave their Estates to each other. They agree that in the event of one of them dying the survivor will “look after” all of the children.

Now let’s take this example a little further. Alan is involved in a serious accident and dies. As a result, Nora inherits the entire Estate. A few years pass and Nora falls in love with, and marries, her new partner, Oliver, who has a child (Steven) from his first marriage. They have no children together.

Again, Nora and Oliver make their Wills and agree to leave everything to each other, and promise each other that in the event of their death the survivor will provide for all their children.

You can probably see the potential problems at each stage.

On the death of Alan, Nora could change her Will to leave the Estate to her two children (Paul, from her first marriage, and Wanda). This would effectively disinherit Alan’s children from his first marriage (Ben and Charlotte).

However, on her death, Nora’s Estate has passed to Oliver, who could now change his Will and leave the entire Estate to Steven, his only child from his previous marriage. By this stage none of Alan or Nora’s children have received an inheritance, despite all the promises that have been made along the way. All the children, apart from Steven), have suffered the effects of sideways disinheritance.

As most of the value of a person’s Estate is usually made up from the value of the family home the effects of sideways disinheritance can largely be avoided by incorporating Protective Property Will Trusts within your Will.

In our example here, if Alan and Nora had used Protective Property Will Trusts their Joint Tenancy ownership of the family home would have been converted into a tenants-in-common basis with each owning 50% of the property. By doing so Alan would have left his 50% share to his children (Ben and Charlotte from his first marriage, and Wanda who he had with Nora). The Protective Property Will Trust incorporates a life interest for the survivor. Nora would have left her 50% share of the property to her two children (Paul, from her first marriage, and Wanda).

So if you are concerned what will happen to your children’s rightful inheritance, then speak to us about including a Protective Property Will Trust in your Will. Let’s face it – none of us know just what’s round the corner – and we’d all hate to think that our children could be excluded from their inheritance. No matter what promises are made, the tendency is for the survivors to protect their own children. All too often children from former relationships can be subject to sideways disinheritance and denied their rightful inheritance.

3. To resolve disagreements on who should get what

The Protective Property Will Trust can also be very useful where joint owners cannot agree as to how the asset should be left. Whilst most couples are happy to mirror each others wishes when it comes to leaving their assets, this is not always the case. Despite being married for a lifetime some married couples have difficulty in deciding how their Estate should be split. It’s a fact that most parents will leave their Estate split equally between their children – but not always. Where couples can’t agree the solution could be to convert the property ownership to a tenants-in-common basis. By doing so each partner can leave their half of the family home whichever way they want!

However, the problem becomes more acute when one party has children, and the other doesn’t. If the childless partner doesn’t get on with their partner’s children they will undoubtedly be insistent that their share of the property goes, for example, to their family, friends or charity. Again, a Protective Property Will Trust will ensure that each other’s wishes are secured, as well as protecting the survivor with a life interest.

What’s not covered?

Although it may seem that the Protective Property Will Trust has thought of everything there are some situations that it doesn’t cater for (e.g. if both owners of a property require long-term care at the same time). It would be impossible to try and list them all here but there is usually a solution available to cover most scenarios.

If your individual circumstances do not appear to be covered by a Protective Property Will Trust we will be happy to arrange a no-obligation home visit with one of our experienced Estate Planning Practitioners who will be able to give you advice on the options available to meet your needs.

How much does it cost?

Although the concept of asset protection may seem highly complex, its use can be extremely beneficial to you and your family. If your circumstances fall into one of the above categories.

If you would like to discuss how using a Protective Property Trust could help you please get in touch, we will be more then happy to explain how this scheme could protect your property from third parties, as well as protecting your beneficiaries inheritance.

Single Application

£399
  • plus Trust registration fee on death*

Joint Application

£599
  • plus Trust registration fee on first death*

* The Trust registration fee covers the cost of updating the Land Registry records with details of the Trust, and adding the Trustees to the Proprietorship Register. The current fee for this is £800 – £1,000 depending on the value of the property.

Right to Occupy Will Trust2018-10-25T19:46:39+00:00

A Right to Occupy is a clause in a Will that gives a beneficiary the right to occupy a property for a period of time and that ends in specified circumstances, for example:

  • a period of years (such as two years, 5 years etc)
  • at a certain age (such as at age 18, age 21 etc)
  • on the occurrence of a certain event (on death, or marriage etc)

The beneficiary has an interest in possession limited to the property itself, and not the proceeds of sale.

So in what circumstances might you include a Right to Occupy clause in your Will?

1. Children living at home

You may have children, and wish to leave your home to all of them in equal shares. However, one of them may still live at home and in order to prevent them from being forced out of the home, you may wish to provide a Right to Occupy, for example:

  • until they reach a certain age, for instance 18 or 21, or
  • for two years so as to allow them time to make arrangements for alternative accommodation

2. Elderly relative lives in the property

If you have an elderly relative living with you, there may be a desire to provide a Right to Occupy, for example:

  • until their death, or
  • until they enter into long-term care

If you would like to protect a person’s Right to Occupy your property after you’ve gone we can incorporate the appropriate clauses in you Will to reflect your wishes. If you require further clarification on this right for someone you care about, just contact us – we’ll be happy to help!

Single Application

£399
  • plus Trust registration fee*

Joint Application

£599
  • plus Trust registration fee*

* The Trust registration fee covers the cost of updating the Land Registry records with details of the Trust, and adding the Trustees to the Proprietorship Register. The current fee for this is £800 – £1,000 depending on the value of the property.

Flexible Life Interest Will Trust2018-10-26T13:29:27+00:00

A Flexible Life Interest Trust (FLIT) in your Will offers greater peace of mind if you wish to protect the value of your estate for future generations. It is often described as the ideal modern Will Trust, as it allows for adequate provision for the surviving spouse/partner, whilst incorporating flexibility into the Will whereby other family members/beneficiaries may benefit should the survivor not require the provision after the first death.

This Trust is created on the death of the first spouse/partner and the assets of the deceased are held in a trust which pays any income generated to the survivor for their lifetime. On the death of the survivor, the trust capital is passed to nominated beneficiaries, such as children. Because the capital in the trust is not owned by the surviving spouse/partner, it cannot be given away by them to, say, a new spouse or partner, and it cannot be assessed if the survivor needs long term care.

The Trust

  • Includes powers for the trustees to lend trust capital to the survivor. So if they need capital, the trustees can lend it to them – with the capital being repaid either when the survivor dies or if they go into care.
  • Includes powers for the trustees to give capital to the survivor. It is unlikely that this power would be used because the survivor could then give this to a new spouse or partner and it would be assessed if they went into care. However, as a flexible trust, it enables the trust to be wound up and the whole estate given outright to the surviving spouse/partner if appropriate.
  • Includes powers to pay capital to the nominated beneficiaries (children, for example) so that if children need capital and the surviving spouse/partner does not (for example, if the survivor is in a care home and the children are in need of capital to reduce their mortgages), capital in the trust could be paid to them.

Key benefits

  • Guarantees who will benefit from your estate if your surviving spouse/partner either remarries, enters into a new relationship or writes a new Will after your death.
  • Allows a nominated person to benefit from the income generated from your estate when you are gone, whilst protecting the capital value for future generations.
  • Reduce the potential impact of residential care fees on the value of your estate should your surviving partner go into care.

Single

£399

Joint

£599
Discretionary Will Trust2018-10-26T13:26:37+00:00

A Discretionary Will Trust is a way of passing your estate on to those you wish to inherit on a discretionary basis. This means that you indicate in your Wills the people, or groups of people (e.g. children, grandchildren), that could potentially inherit your estate, but the decision as to who inherits what, and when, lies with your trustees. You would then provide your trustees with a letter of wishes outlining your preferences and guidance regarding the distribution of your estate.

The benefits of using Discretionary Trusts include:

  • Flexibility: Because the trust is discretionary you are simply indicating who can potentially benefit from your estate. You are then able to advise the trustees, either verbally or in writing, how you would like your estate to be used, and you can change these preferences whenever you like as circumstances change.
  • Control: Your trustees will have full control over your estate when you’re no longer here and will therefore be able to ensure that your estate is handled as you would have wished, and is used for the right reasons and not dwindled unnecessarily or lost in any future marital breakdowns your potential beneficiaries may experience. For example, they will be able to release funds to your children to assist with the cost of education, or hold onto funds if one of your beneficiaries is in an undesirable relationship.

Single

£399

Joint

£599
Vulnerable/Disabled Beneficiary Will Trust2018-10-26T13:04:54+00:00

Discretionary Trusts are set up by parents or other relatives as a way of making long-term financial provision for a disabled/vulnerable beneficiary. The reason a Trust is useful is that assets, once put in Trust, do not belong to either the donor (the person making the gift), or the beneficiary of the Trust.

This means that the assets held in Trust are not taken into account when assessing entitlement to state benefits like Income Support, or local authority obligations to fund some form of support or care.

For example, if parents make a Will that leaves their entire Estate to their child, and the value of the Estate amounts to more than (currently) £6,000, any means tested benefits the child currently receives will be immediately withdrawn until the value of the inheritance falls below the threshold level. If the Will had left the Estate in Trust the benefits would not have been affected.

The assets in the Trust can then be used to pay for extra things which any benefits may not fund, such as a holiday, new clothes, electrical goods, special equipment and luxuries. Importantly a Trust can also hold, manage and maintain the parental home if put into the Trust. Other reasons for creating a Trust is to help provide some financial protection protection into the future:

  • because of fears that local authorities may not always continue to provide care, or may provide insufficient care
  • providing a source of money to “top up” what a local authority is prepared to pay for care
  • to obtain better quality care, or a different care package
  • to enable the beneficiary to remain where they are, rather than be forced to move
  • to permit more choice and options now, and in the future

Therefore, before making a Will where there is a disabled/vulnerable beneficiary, the inclusion of a Trust should be carefully considered, otherwise the following could result:

  • benefits could be stopped
  • Entitlement to local authority could be stopped
  • a Receiver from the Court of Protection may be appointed to manage the affairs of the disabled/vulnerable beneficiary, which may result in delays and expensive fees, and they may not act as you would wish
  • the Estate may be subject to a mush harsher tax treatment

So, if one of your beneficiaries is in some way either physically or mentally disabled or vulnerable in some other way it really is important to protect their financial future through the creation of an appropriate Trust.

The creation of a Trust within your Will is quite straightforward, but it needs to be arranged in good time. If you die without having put the appropriate measures into place, then it will be too late!

For further information, and to make your Will to incorporate a Trust, please don’t hesitate to contact us. You’ll find us to be helpful, friendly and professional!

Single

£399

Joint

£599