Types of Will Trust

If you leave your estate absolutely to your children or grandchildren and any of them are under 18 when you die, your Will can create a Bare Trust for them. The child will become absolutely entitled to the assets within the Bare Trust when they reach 18 Until the child reaches 18, the trustees have no active powers except the duty to hold the legal title to the trust assets and invest them appropriately. Before the child reaches 18, both capital and income from the trust can be used for the child’s benefit.

If you establish a Life Interest Trust in your Will, you can choose a beneficiary called the life tenant who will be provided with the right to receive the income from the trust. This right is usually given for their lifetime, and on their death, the trust fund can pass to other beneficiaries named in your Will.

A Discretionary Trust is the most flexible sort of trust that you can create in your Will but it also has the highest Inheritance Tax charge attached to it. You may be prepared to pay the extra tax in order to maintain flexibility and allow your trustees to distribute your estate depending on the particular circumstances of your beneficiaries. You can leave your trustees guidance on how you would like them to use the assets but they are not bound by any of your requests.

A Bereaved Minor’s Trust can be created for a child under 18, at least one of whose parents has died. Under such a trust the child needs to become absolutely entitled to the trust property on or before they reach the age of 18. A Bereaved Minor’s Trust benefits from favourable Inheritance Tax treatment. It is not automatically created if you simply leave your estate outright to your children. Your Will needs to state that your estate should pass your children who survive you and attain the age of 18.

If you want someone to benefit under your Will who suffers from a mental or physical disability, you may wish to include a trust which qualifies as a Disabled Person’s trust. This sort of trust attracts a favourable tax treatment if it meets certain conditions.

If you would prefer to delay your children’s entitlement to their inheritance beyond the age of 18, an 18 to 25 Trust may be appropriate. This sort of trust is subject to less Inheritance Tax than a Discretionary Trust but the beneficiary needs to become entitled to the capital in the trust by the age of 25.