A Will often creates one or more trusts in order to give effect to its provisions. It is not essential to do so, but it is very common; and sometimes it is the only way that certain purposes can be achieved.
Control and protect family assets
One of the principal reasons for creating trusts in a Will is to ensure that some control is exercised over family assets. For example, by placing property or assets in trust, you can ensure that it is not disposed of completely, but continues to be invested or used to generate income and provide for the beneficiaries.
Avoid beneficiaries inheriting too young
You may want to prevent someone from receiving part of their inheritance – or the whole of it – until they have reached a certain age. You could do this by providing in your Will that the inheritance is to be on trust for the beneficiary until they reach that age. Often you can also provide for the beneficiary to receive an income from the trust until they have reached the specified age.
Reduce Inheritance Tax liability
As a rule, Inheritance Tax of 40% is payable on anything over £325,000 of the value of your estate. But both the amount of the estate that is taxable, and the rate of tax payable, can be more advantageously planned by putting property in trust. There are a number of exceptions to this, and it can be quite a job to plan, so it is best to have specialist professional advice, especially if your estate is large or complicated.
Life interests
You may wish to give a life interest to your partner, and then have your estate pass intact to some other beneficiaries. Typically this might be if you are in a second or subsequent marriage. On your death you might wish your spouse to be able to continue living in the family home for their lifetime, and afterwards for the home to go to your children from a previous marriage.
Protect the family home from being sold to pay for residential care
It is a worry to people that after they have died, their partner may have to sell their family home in order to pay the costs of residential care. It is often thought that this can be prevented by using the Will to put the property in trust, but it isn’t necessarily as simple as that. If you want to use your Will to minimise the possibility of your house being sold for care home fees, you should seek specialist professional advice.