Do I need a trust in my will?
Will trusts, as the name suggests, are established through your will, so they only come into effect upon your death. They can be a useful tool to ring-fence your bequeathed assets for your family and future generations, thus protecting your family from third parties and outside influences after you die. We've listed some common types of will trusts and how they can typically be used below.
This page is for information purposes only and should not be taken as advice. If you would like to understand more about trusts and how they could potentially benefit you and your family please contact us to arrange a free advice meeting, we'll be glad to help.
About DL Wills
Property Protection Trusts(PPTs)
Designed to protect your share of your home or other property when you die, a PPT ensures that the full rights to use your property can be passed to your surviving spouse or partner, without risking the capital should they go into a new relationship or long-term care in the future. A PPT protects the surviving partner's rights first and foremost, whilst also protecting the capital for your future beneficiaries after the survivor dies, e.g. your children.
Life Interest Trusts (LITs)
Work in a similar way to the PPT, except they can be used for any bequeathed asset including cash, investments, other properties and so on. A LIT ensures that the income from the trust assets can be passed to your surviving spouse or partner, without risking the capital should they go into a new relationship or long-term care in the future. A LIT protects the surviving partner's rights first and foremost, whilst also protecting the capital for your future beneficiaries after the survivor dies, e.g. your children.
Discretionary Trusts (DTs)
A Discretionary Trust provides your chosen trustees with the power to decide how and when to distribute your bequeathed assets to your beneficiaries, rather than specifying fixed amounts or timings. DTs can be a very useful way to protecting your beneficiaries from outside influences such as bankruptcy, divorce, bad decisions etc. Any assets in this type of trust are outside the estates of your beneficiaries, so DTs can also be a very useful tool when planning inheritance tax for future generations.
Flexible Life Interest Trusts (FLITs)
FLITS protect your bequeathed assets for a specific beneficiary for their lifetime, usually your spouse, while allowing your chosen trustees complete flexibility to manage the trust’s assets for the benefit of your future beneficiaries, usually your children and their descendants. A FLIT thus combines the benefits of a life interest for your spouse with the benefits of a discretionary trust for your children. They can be a very useful inheritance tax planning tool between first and second death as well, however they are not compatible with the residence nil rate band so they are typically used to protect bequeathed investment assets rather than your main home, which is more commonly protected via a PPT above.
Business Property Relief Trusts (BPRTs) and Agricultural Relief Trusts (ARTs)
A BPR Trust in your will allows any business assets that potentially attract 100% business property relief from inheritance tax (e.g. your company shares) to be protected after your death, same as with a discretionary trust. This means that those assets are prevented from entering the estates of your beneficiaries, thus if the company is sold in the future, the sale proceeds will be in the trust and thus excluded from their inheritance tax calculations when they die. The same type of trust can potentially be used in conjunction with agricultural property relief. Please contact us to see whether your business can benefit from this type of protection.
Vunerable Person's Trusts (VPTs)
These trusts can be very useful where you need to protect assets you leave to beneficiaries with disabilities, leaving them instead to be managed on that beneficiary's behalf by your chosen trustees. They can also potentially (depending on the local authority) protect any benefits entitlements for that beneficiary as well, because there is no absolute entitlement to them. Thus they work in the same way as a discretionary trust, except for only one main beneficiary. They are also compatible with the residence nil rate band thus making them even more useful. Any assets left in the trust when the main beneficiary dies are automatically available to your chosen alternative beneficiaries.