Wills, Trusts and Estates FAQs

This is a term used to describe “Trusts and Estates”, also referred to as “Private Client”. It encompasses legal matters such as Wills, Powers of Attorney, Trusts, Court of Protection and Deputyships, Probate and Estate administration on death.

We deal with a range of issues that affect your “estate”.

This may include the creation and management of lifetime trusts; drafting Wills (including Wills with trusts); creating and registering Powers of Attorney; acting as professional Attorneys and Deputies when managing estates for those who are alive; dealing with inheritance tax and retirement planning; administering estates for those who have passed away, including obtaining Grant of Probate or Letters of Administration and ensuring beneficiaries receive their inheritance.

Property in a trust is managed by Trustees – these are individuals left in charge of how the Trust is run.

The people who are entitled to the benefit of the property in the Trust may be different individuals, referred to as Beneficiaries. The trust assets are held by the Trustees in accordance with the terms of the Trust, but they are not owned by the Trustees in their personal capacity.

The Trustees are effectively custodians of the Trust property for the time that the Trust is in existence.

A Trust is an arrangement that determines a specific way of managing assets. It is created either by circumstances or a specific legal document that states how the assets should be managed and by whom.

An estate is the term used to refer to everything which is owned by an individual.

This may comprise of bank accounts, shares, investments, household items and property. A person’s estate is everything they own and have the right to benefit from or enjoy.

Gifting your property outright to family members is very risky and does not have any practical benefit as it does not protect you from care fees or from inheritance tax. In fact, you risk losing your home if the person you gifted it to passes away, loses mental capacity, becomes bankrupt or gets divorced. Instead, Asset Protection Trusts can be more protective and can ensure that your house can be used and managed in a way which you can dictate within the trust. In a way, Trusts can help you to control how assets are managed after you have given them away. This may have the effect of ring-fencing your property from other assessments (e.g care fees) but please note this is not always effective and depends on the circumstances. Putting your house into trust is a personal decision which should not be made lightly.

There are many disadvantages of doing so and you must carefully weigh these up before deciding on a way forward. For example, once you put your house into trust, it is no longer yours and is held by the Trustees in accordance with the rules in the trust.

If your intention is to avoid paying for care, putting your house into trust may be seen as ‘deliberate deprivation’ and it may still be taken into account for care funding purposes. Please ensure you talk to one of our specialists if you are considering whether this step is right for you.

Beneficiaries generally have a right to enforce the terms of the Trust and to hold Trustees accountable for their actions.

As a result, Trustees should provide beneficiaries with basic information, such as a copy of the Trust document and Trust accounts.

Please note that beneficiary rights may vary depending on the type of Trust. If you are a potential beneficiary under a Discretionary Trust for example, you do not have any right to any part of the trust fund as this is at the discretion of the Trustees.

Whilst it can be helpful to appoint a personal friend or a close family member to act as a Trustee for a number of reasons, there is the possibility that they may not be even handed whereas an independent trustee, such as Tollers, would make decisions impartially as they would not have a financial or personal interest in the trust or its assets.

Ordinarily, people tend to choose close family or friends whom they trust the most and consider competent, fair, responsible and honest although it is sensible to consider appointing at least one trustee who is a generation down from you and whether by appointing one family member it would cause animosity within the family.

If the value of your estate on your death is above the current £325,000 threshold known as the nil rate band, the amount above it might be liable for tax at the rate of 40%. Planning is essential to try and reduce this tax liability, as certain beneficiaries such as charities, spouses or civil partners may be exempt. In addition, leaving your primary residence to children or grandchildren may increase your personal allowance before liable for inheritance tax to £500,000.

Bare trusts can be used to hold assets for children to ensure the funds are not used until they are adults and able to make financially sensible decisions themselves. Funds held in the bare trust can be accessed for the children’s benefit before they turn 18, for example to pay for school fees. Transfers into a bare trust also have the benefit that they may also be exempt from Inheritance Tax, as long as the person making paying the funds into the trust survives for 7 years after making the transfer.

Trusts are usually considered to be distinct ring-fenced assets, although there are some circumstances where the value of the Trust is included/considered as part of your estate for tax purposes only.

For example, the beneficiary of a life interest trust has the right to benefit from the trust assets during their lifetime. If benefits continue up until that beneficiary’s death, the value of the trust at the date of their death may be added to their own estate value for the calculation of inheritance tax.

A bare Trust (i.e held directly for the benefit of a specific individual) may also be considered as part of your estate.

Pros – Trusts can be very useful for controlling (to some degree) how assets are managed and used after you have given them away. In some circumstances, Trusts may also protect vulnerable beneficiaries from exploitation (by having someone who is independent control the funds for them) and may allow you to leave inheritance for vulnerable individuals without impacting their benefit entitlement.

Some forms of Trust may also protect assets for (for example) your children in the case of their own divorce or where you would prefer the money to be given to them in stages rather than all in one go.

Cons – Trusts can sometimes be complex and difficult to understand. Depending on the Trust, this may also need to be registered with HMRC and there could be hefty tax payments when taking money out of the Trust.

Trust accounts ought to be produced every year and this could be particularly onerous or complicated for individuals who are not experienced in this area.

Having professional Trustees would certainly have its benefits here.