What is a Will Trust?
A Trust is an arrangement whereby you have one set of people (the Trustees) looking after assets (the Trust fund) that they hold on behalf of others (the Beneficiaries).
A Will Trust can be made and changed at any time during your lifetime by including it in your Will. It comes into effect on your death.
The Will names the Trustees and the Beneficiaries and sets out what assets are to pass into the Trust fund and the terms upon which this is to be held.
If you have both a current spouse or partner and also children from a previous relationship, you may want your Will to provide for both your spouse or partner if they survive you for their lifetime and, after they die, for your children also.
If your Will leaves your estate to your spouse or partner, they may then give this away or spend it or leave it by their Will to their own children. This would mean your children would not receive their inheritance.
Alternatively your Will might leave your estate to your children who could then require your spouse or partner to for example move out of their home so your children can sell it and take their inheritance.
Even if the relationship between your spouse or partner and your children is currently good, this may turn sour if you were to die.
If your Will includes a life interest Trust in either all of your estate or just part of it, for example your property, then all parties can be protected.
The Trust could give your spouse or partner the right to live rent free in property and receive the income (interest, dividends or rent) from invested monies for their lifetime.
On their death, the Trust would provide that your estate will then be inherited by your children.
Care must be taken to ensure that the assets you wish to leave into the life interest Trust are owned on your death, either in your sole name or for jointly owned property as tenants in common.
How this could work in practice?
- Peter and Linda are married. They have both been married before. Peter has a son Paul from his first marriage and Linda has a daughter Laura from her first marriage.
- Peter and Linda both make Wills leaving all their estates to pass into a life interest Trust for the benefit of the survivor of them with provision that on the survivor’s death, Paul will inherit Peter’s estate and Laura will inherit Linda’s estate.
- Peter and Linda’s solicitor arranges for them to own their home as tenants in common in equal shares.
- Peter dies.
- Linda continues to live in the property rent free and she receives the interest from Peter’s savings.
- Linda dies some years later.
- Paul inherits his father’s share of the property and savings under the terms of the Trust set up in his Will. Laura inherits her mother’s share of the property and savings under the terms of her Will.