Private Wealth /

Will Trust

Created by your will and taking effect on death, a Will Trust can be an effective way of passing wealth to your loved ones while avoiding unnecessary Inheritance Tax.

Make an enquiryMeet the teamWill Trust

Will Trust
  • Key contact

    Peter Daniel

    Peter Daniel

    Partner - Head of Private Wealth

    ArrowView profile

  • The Team

    Our lawyers have the expertise and experience to provide you with creative, personalised solutions in a clear and understandable way.

    ArrowMeet the team

  • Our Publications

    Discover a wealth of invaluable guidance in the form of guides and brochures written by our expert lawyers.

    ArrowSee our downloads

  • Does your Will need updating?

    With 10 simple questions, discover whether you need to update your Will in order to protect your wishes.

    ArrowTake our quiz today

About

What is a Will Trust?

Will Trust is an umbrella term. It describes any trust that is created by your will and activates upon your death. There are several types of Will Trust available and each one is suitable in a different situation. These include discretionary trusts, where trustees have broad discretion as to how much of the trust assets are paid to which beneficiary and when, and Immediate Post Death Interest.

Trusts (IPDI) are where the trustees must pay income to a specific beneficiary during their lifetime, but someone else is entitled to the assets and investments of the trust. As a first step, we will meet with you to understand your reasons for creating a trust and the people you wish to benefit from it. We can then help you decide which type of Will Trust is right for your particular circumstances.

How is a Will Trust created?

You declare the trust in your will: which will then go on to specify

  • the assets or the proportion of your estate over which the trust applies
  • who shall be the trustees and what shall be their powers
  • who shall be the beneficiaries and what shall be their entitlements.

The trustee must have sufficient information to understand your wishes. We can make sure that your will meets these requirements and also advise on other key issues to consider.

Why should I make a Will Trust?

Will Trusts are a valuable estate planning tool? Most often, they are used to:

  • provide you with more control over how your estate is distributed on death
  • place conditions or restrictions on inheritance, such as age limits for when beneficiaries gain access to funds
  • protect vulnerable persons, such as children or those lacking mental capacity, by specifying who should manage their finances until they reach a certain age
  • name people who haven’t yet been born to be beneficiaries, such as future grandchildren and great-grandchildren
  • set up a charitable trust so contributions can be made to your preferred causes
  • avoid “sideways disinheritance” by making sure that a second (or subsequent) spouse is provided for during their lifetime while ensuring the estate is passed to the children of a previous relationship after their death
  • minimise inheritance tax and take advantage of available tax relief

What are the disadvantages of using a Will Trust?

There are no obvious disadvantages in starting out with a flexible trust although advice should always be taken when the will is made so that full account is taken of your circumstances. It is important to select appropriate assets for the type of trust decided on and given that personal, financial and fiscal circumstances are susceptible to change to keep your will under review.

If the trust is an IPDI then it is looked through for the purposes of Inheritance Tax and the assets are currently treated for the purposes of that tax as if they belonged to the beneficiary entitled to enjoy them. Otherwise, there may be exit charges when distributions are made and a charge to Inheritance Tax at each 10-year anniversary, at the same rates as for lifetime trusts, if the trust is not brought to an end within two years of the death.

If you would like to discuss setting up a Will Trust or have any other questions about trusts and estate planning, please get in touch with our team. We are here to help.

Explore the nuances of some of the most common aspects of UK/USA cross-border tax and estate planning.

Spotlight

Trusts for business owners

For clients who own trading businesses, trusts can be useful succession and tax planning vehicles to ensure the preservation of our clients’ wealth. For example, it may be possible to transfer shares in a business into a trust free from inheritance tax, while also optimising the capital gains tax position.

Spotlight

Trusts for future generations

Where clients wish to provide for their children and grandchildren (e.g. for the provision of school fees), it can be prudent to create a trust of up to the available inheritance tax allowance (known as the nil rate band). There will be no inheritance tax on creation and a new trust of this type can be created every seven years. Also, if clients have surplus income, outright gifts or gifts into trust out of this surplus income can be made which are completely exempt from inheritance tax.

Spotlight

Wills for business owners

We advise clients who own businesses on how best to structure their will so as to make use of business property relief in passing assets down to future generations. A will trust to hold business assets is often flexible and tax-efficient, whether the intention is that the business continues to be owned and run by the family, or the business will be sold.

Will Trust Publications

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    Planning with crypto assets

    It is increasingly important for individuals to understand how crypto assets are taxed, both in life and on death, and ensure the consideration of crypto assets in succession planning.

    Download now

  • family eating

    Lifetime Giving Handbook

    We have prepared a handbook to answer the most pressing and common lifetime giving questions and issues including; giving property to the next generation, gifts to vulnerable individuals, how best to fulfil an individual’s philanthropic ambitions, foreign gifts and the tax benefits associated with gifts of art.

    Download now

  • trusts and school fees flyer

    Lifetime Giving | Trusts and School FeesA guide to tax efficient arrangements - A guide to tax efficient arrangements

    Many families contend with paying school fees running into hundreds of thousands of pounds per child over the course of their education. This guide examines some tax efficient arrangements that other family members (typically grandparents) can use to contribute to these costs.

    Download now

  • Coronavirus school closures – Should you consider Parental Leave?

    Lasting powers of attorney

    A guide on making an LPA covering everything you need to know when considering giving another person certain authority to make decisions, in circumstances where you no longer have the mental capacity to do so on your own.

    Download now

  • employment lawyers

    A Question of Capacity

    This guide, A Question of Capacity, outlines key points for consideration to ensure business owners put their businesses in the best position possible in the event of your incapacity.

    Download now

  • cryptocurrency coins

    How are your cryptoassets taxed?

    Guidance for individuals who hold cryptoassets, explaining what taxes they may need to pay, and what records they need to keep. Also included is information for businesses and companies about the tax treatment of cryptoasset transactions.

    Download now

  • Coronavirus (COVID-19) support

    Decrypting a digital world

    An overview of some of the key areas of interest in relation to cryptoassets, their legal treatment in the UK, and how they should be considered in tax and estate planning.

    Download now

  • Private Wealth

    Why might a trust be of benefit?

    A guide considering the many reasons and many circumstances where a trust might be of benefit.

    Download now

Will Trust insights

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Need some more information? Make an enquiry below



    Will Trust key contacts

    Will Trust

    Will Trust

    Will Trust

    Created by your will and taking effect on death, a Will Trust can be an effective way of passing wealth to your loved ones while avoiding unnecessary Inheritance Tax.

    • Key contact

      Peter Daniel

      Peter Daniel

      Partner - Head of Private Wealth

      ArrowView profile

    • The Team

      Our lawyers have the expertise and experience to provide you with creative, personalised solutions in a clear and understandable way.

      ArrowMeet the team

    • Our Publications

      Discover a wealth of invaluable guidance in the form of guides and brochures written by our expert lawyers.

      ArrowSee our downloads

    • Does your Will need updating?

      With 10 simple questions, discover whether you need to update your Will in order to protect your wishes.

      ArrowTake our quiz today

    What is a Will Trust?

    Will Trust is an umbrella term. It describes any trust that is created by your will and activates upon your death. There are several types of Will Trust available and each one is suitable in a different situation. These include discretionary trusts, where trustees have broad discretion as to how much of the trust assets are paid to which beneficiary and when, and Immediate Post Death Interest.

    Trusts (IPDI) are where the trustees must pay income to a specific beneficiary during their lifetime, but someone else is entitled to the assets and investments of the trust. As a first step, we will meet with you to understand your reasons for creating a trust and the people you wish to benefit from it. We can then help you decide which type of Will Trust is right for your particular circumstances.

    How is a Will Trust created?

    You declare the trust in your will: which will then go on to specify

    • the assets or the proportion of your estate over which the trust applies
    • who shall be the trustees and what shall be their powers
    • who shall be the beneficiaries and what shall be their entitlements.

    The trustee must have sufficient information to understand your wishes. We can make sure that your will meets these requirements and also advise on other key issues to consider.

    Why should I make a Will Trust?

    Will Trusts are a valuable estate planning tool? Most often, they are used to:

    • provide you with more control over how your estate is distributed on death
    • place conditions or restrictions on inheritance, such as age limits for when beneficiaries gain access to funds
    • protect vulnerable persons, such as children or those lacking mental capacity, by specifying who should manage their finances until they reach a certain age
    • name people who haven’t yet been born to be beneficiaries, such as future grandchildren and great-grandchildren
    • set up a charitable trust so contributions can be made to your preferred causes
    • avoid “sideways disinheritance” by making sure that a second (or subsequent) spouse is provided for during their lifetime while ensuring the estate is passed to the children of a previous relationship after their death
    • minimise inheritance tax and take advantage of available tax relief

    What are the disadvantages of using a Will Trust?

    There are no obvious disadvantages in starting out with a flexible trust although advice should always be taken when the will is made so that full account is taken of your circumstances. It is important to select appropriate assets for the type of trust decided on and given that personal, financial and fiscal circumstances are susceptible to change to keep your will under review.

    If the trust is an IPDI then it is looked through for the purposes of Inheritance Tax and the assets are currently treated for the purposes of that tax as if they belonged to the beneficiary entitled to enjoy them. Otherwise, there may be exit charges when distributions are made and a charge to Inheritance Tax at each 10-year anniversary, at the same rates as for lifetime trusts, if the trust is not brought to an end within two years of the death.

    If you would like to discuss setting up a Will Trust or have any other questions about trusts and estate planning, please get in touch with our team. We are here to help.

    Explore the nuances of some of the most common aspects of UK/USA cross-border tax and estate planning.

    SPOTLIGHT

    Trusts for business ownersopen

    For clients who own trading businesses, trusts can be useful succession and tax planning vehicles to ensure the preservation of our clients’ wealth. For example, it may be possible to transfer shares in a business into a trust free from inheritance tax, while also optimising the capital gains tax position.

    Trusts for future generationsopen

    Where clients wish to provide for their children and grandchildren (e.g. for the provision of school fees), it can be prudent to create a trust of up to the available inheritance tax allowance (known as the nil rate band). There will be no inheritance tax on creation and a new trust of this type can be created every seven years. Also, if clients have surplus income, outright gifts or gifts into trust out of this surplus income can be made which are completely exempt from inheritance tax.

    Wills for business ownersopen

    We advise clients who own businesses on how best to structure their will so as to make use of business property relief in passing assets down to future generations. A will trust to hold business assets is often flexible and tax-efficient, whether the intention is that the business continues to be owned and run by the family, or the business will be sold.

    Will Trust insights

    View all insights

    Need some more information? Make an enquiry below.

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