Andrea writes about trusts in Wills, something many of her clients consider to give added protection for those they love.
When I was first learning about Trusts as a new Will Writer, we got to the section on Trusts in Wills and I thought ‘here we go, this is going to be really complicated!’. Now I know more, the simplest way of thinking about a Trust is that it is a clause in your Will that adds further protection to your loved ones. In essence, the Trust is a ‘pot’ of money or a share of a property, that doesn’t get given out immediately when you pass away. Why would anyone want that?! Here are reasons:
Trusts for Children
Very simple Trusts in Wills are those that says your children don’t inherit until a certain age. Not many people choose 18 as the age of inheritance these days, most people say 21 or even 25. So, almost all Wills have this type of Trust.
Trusts of Property
Another very common type of trust in Wills are Property Protection Trusts (PPT). When we first see clients, they often say ‘it’s really simple – we just want to leave everything to each other, then down to our children’. They are surprised to hear that this is not always a good idea. For example, if one passes away and the surviving spouse goes into care, some, or all of the value of the house can be lost in care fees. Our home is usually our largest asset and clients are happy to know that their share of the property can be protected in a Trust.
Another scenario where a PPT can help is re-marriage. If the survivor remarries after one partner passes away, the house can end up in the hands of some future husband/wife. That means their children may not get anything! Including a PPT protects the share of the first to die for their children. The surviving spouse can still live in the property – or have the option to upsize, downsize or sell up altogether.
A PPT does not hinder any life choices about where you live, now or in the future. It doesn’t even kick-in until one of you passes away. So, it relates to whichever house you happen to own at that time. If the remaining partner wants to move, the Trust follows them to the new house. If there’s any downsizing money, the survivor keeps half of it, and you choose when making your Will what happens to the other half. It can also go to the survivor, or it can go back into the Trust to be protected for the children.
Trusts for Vulnerable people
Trusts in Wills can help with several scenarios.
Your child may receive means-tested benefits because they are disabled or have health issues. This means that if they receive an inheritance their benefits stop, they then spend the inheritance and the benefits re-start. A Discretionary Trust can instead ‘hold the money in a pot’. This means their inheritance can be made available to them without affecting their benefits. You can guide how the money could be used in a letter that is kept with your Will. Your “trustees” (the people ‘holding the purse strings’) hold the money for them. But it’s not actually theirs until it’s handed over, meaning their benefits may continue.
This type of Trust can also help with vulnerable adult children. They may be struggling with alcohol, drug or gambling issues. So receiving a lump sum inheritance may not be appropriate for them. Instead, your named Trustees can “drip-feed” money to them, providing at least some protection from harm.
Living Trusts
One type of Trust Morecambe Bay Wills does not offer is Lifetime or Living Trusts. This is where you put all your assets in Trust during your lifetime. So your are putting assets into trust while you’re alive – rather than having these trusts in wills. Lots of people enter into them without knowing the true consequences, and some firms charge handsomely for this type of product. There are entry charges (when you put assets in) and exit charges (when you take assets out). There are also 10-year anniversary charges on these Trusts, payable by the Trustees. Many people may have been named as Trustees and not even realise they are facing this charge every 10 years.
These have become more popular in the last 10 years. Many are now coming up to the first chargeable anniversary. Several people in the Will industry are currently discussing how these Trusts may end up hitting the headlines as the next big ‘mis-selling scandal’. There are genuine reasons these can help clients. So if we are asked about them we will refer you to experts we know and trust.
We are here to guide you
At Morecambe Bay Wills we pride ourselves on giving you all the options and letting you choose if a Trust is appropriate in your Will. It will always upset me that people can make DIY Wills without knowing the full facts. These scenarios apply to most of us. A simple Will may not provide the protection we want for our loved ones.
You may think Trusts in Wills are costly – but for the protection they give, the cost is very reasonable. Please ring us or look at our Website for our prices, or you can request any of our factsheets HERE. We have an upfront pricing policy – meaning there are never any hidden charges.
Our team are here to help. We can see you at home or at our White Cross offices in Lancaster. Please give your family the protection they deserve and yourself the peace of mind knowing your affairs are in order.