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An increasing number of people choose to leave their assets to a trust created in their Wills; rather than outright to various family members. This choice is often less driven by Inheritance Tax considerations and more by the desire to ensure that assets are protected for future generations.
Blended families are becoming the norm. A “simple” Will, for example, leaving assets outright to a surviving spouse, then to the children, is often not the most appropriate option. A person marrying for the second time may be faced with the challenge of providing for a new spouse while wishing to preserve assets for the children of their first marriage. The solution may be a Life Interest Trust for the surviving spouse (a right to income/enjoyment of the assets) with the estate ultimately being ring-fenced for the children on the spouse’s death.
In some instances, it may be appropriate for estate funds to be protected in a Discretionary Trust and managed by trusted individuals. This may be useful where there is a significant amount of wealth and / or concerns around children inheriting a significant sum outright.
Whether a Will incorporates a Life Interest Trust or a Discretionary Trust, the choice of trustees will be essential.
Will Trusts are usually drafted with flexibility in mind. As a result, a great deal of power is put into the hands of the trustees. A well drafted Letter of Wishes will be crucial to ensuring that your chosen trustees are provided with clear guidance as to your priorities and how you would like them to exercise their powers. Ultimately, as a Letter of Wishes is not legally binding, it comes down to appointing trustees you trust completely to follow those wishes.
The key thing is to select trustees you have a good relationship with and who you believe will understand and carry out your wishes. They do not need to have any particular professional expertise or skill in managing estates, though if they do possess any such skills then this is a bonus. You do however want someone who will take a hands-on approach to the role and seek professional advice where necessary.
Close friends or family members will often be appropriate choices as trustees. It helps if they understand the family dynamic and the relationships involved. Sometimes however, where there is discord within the family, the estate is particularly complex or there are very few, if any, people you trust with the role, a professional can be appointed as an impartial, third party trustee.
It is important to remember that a trust contained in a Will only takes effect on death. Until that point, the Will and the trustees can be changed at any time. Similarly, a Letter of Wishes containing guidance to the trustees can be updated with minimal formality, without having to revisit the Will itself. The decisions you make, whilst significant, do not therefore have to be forever and should be kept under review.
FURTHER INFORMATION
If you would like any further information or advice about the topic discussed in this blog, please contact Stephanie Mooney or our Private Client team.
ABOUT THE AUTHOR
Stephanie Mooney is a Senior Associate in the Private Client team . She advises on succession planning, the preparation of Wills, inheritance tax, trust creation and administration, mental capacity and the administration of estates.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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