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“In this world nothing can be said to be certain, except death and taxes” – Benjamin Franklin.
Why do you need a Will?
A Will is a legal document that allows you to express your wishes about the people and the way in which you want to pass down your money, property, and possessions after your demise. Here are some reasons why you need a Will:
- To determine who gets what: In the absence of a valid Will upon death, the law of Intestacy decides who gets what and how much. This may result in unintended beneficiaries or leaving desired recipients with nothing. It doesn’t matter what your relationship was like with those people when you were alive. In the case of no traceable living relatives, the law in England and Wales dictates that everything you own, known as your estate, passes to the Crown.
- To appoint guardians for your children: If you have children under the age of 18, you can use your Will to appoint guardians for them. Failing to do so, hands the local authority the power to make this crucial decision.
- To make provision for children with special needs
- To reduce the amount of Inheritance Tax you pay
- To protect your estate from other claims to your wealth
- To make gifts to friends, colleagues, and charities
- To appoint Executors and Trustees of your choice
- To ensure that your business is administered appropriately
- To avoid lengthy delays and family disputes
- To plan an orderly transition of wealth through generations in a family
While DIY Wills are cheap and easy to find, the implications of making a Will without the help of a specialist estate practitioner or a legal advisor may render your wishes uncertain or invalid, and could lead to more costs and upsets being incurred, should your Will be challenged post-death. A DIY Will may not reflect your familial circumstances and you may require a more tailored and bespoke solution to give you and your loved ones the confidence and security you need.
A Will prepared by professionals can offer advice regarding estate planning to minimise tax burdens after someone has passed away, or advice on Trusts to deal with younger or vulnerable beneficiaries.
Will Trust:
Are you thinking about passing your hard earned wealth to your loved ones as either gifts or passing it off absolutely in your Will? This approach may be risky and tax-inefficient.
According to a recent study by Handelsbanken Wealth Management, 67% of parents have decided to delay family inheritance planning, fearing complications regarding children’s marriages.
Nearly two-thirds of parents are delaying giving out early inheritances as they are worried about rising divorce rates caused by the coronavirus pandemic, research shows.
The solution you seek may lie within a Trust.
A trust is a method of managing assets created during someone’s lifetime or upon their death.
There are three parties involved in the creation of a trust: the settlor, the trustee and the beneficiary.
Settlor – is the original owner of the assets (i.e. property, money or investments etc.) who set up and transfer assets into the trust.
Trustee – is the person(s) named in the trust deed to look after and manage the assets held in the trust. The trustees have certain powers as defined in the trust deed, The law provides additional power to manage the assets in the best interests of the beneficiaries.
Beneficiaries can be trustees and this may result in conflict of interest. The most suitable person for the position of trustee is one who understands your wishes, has no vested interest in the trust fund themselves (i.e. an independent person).
Beneficiary – While beneficiaries can also be trustees, this arrangement may lead to a conflict of interest. Ideally, the most suitable person for the trustee role is someone who comprehends your wishes, holds no vested interest in the trust fund personally (i.e., an independent person).
A Will Trust refers to a trust established in your Will which takes effect upon your demise.
• Named individual
• A class of people, such as “my children and grandchildren”.
• A charity or number of charities.
- Trusts offer flexibility when testators are uncertain about how to leave their property, and in some cases, they can yield tax advantages.
- To control and protect your money and property beyond the grave for your loved ones from bankruptcy, marriage/remarriage, long-term care and Inheritance tax etc.
- To support individuals incapable of managing the money or property due to immaturity or disability.
Trusts are managed by a trustee appointed by you in your Will. The trustee has fiduciary duties.
We have various trust options in your Will to suit your family circumstances.
Contact us now to discuss suitable trust options for you and your family.
A life interest trust gives the life tenant (i.e. a beneficiary who is entitled to lifetime benefit) enjoyment of the benefits of trust assets upon your death without passing on the ownership. Ownership can then be passed down to who you wish (i.e. your children from your first marriage). Life interest trusts serve to protect your share of the property against care home fees, bankruptcy or the remarriage of your spouse if you pass it onto them. These trusts are very popular among married couples or couples who have children from previous marriages. These trusts are treated as owned by a life tenant and will be subject to Inheritance tax upon the death of the life tenant.
These trusts grant the life tenant a specific right to reside in a property or share of the property for the rest of their life upon your death. The trust concludes when the right to occupy is no longer necessary, such as if the life tenant enters long-term care or remarries. At that point, the property transfers to the ultimate beneficiary. The life tenant is unable to receive income from the property while in a care home or if they have rented the property.
Similar to life interest trust, the FLIT is created at the death of the first spouse. The capital assets (i.e. property & cash) of the deceased are held in a trust that pays any income generated to the surviving spouse for their lifetime. Similar to life interest trust, assets are protected for others and become part of the surviving spouse’s estate upon death.
Unlike Life Interest Trust or Right of Occupation Trust, this FLIT grants more powers to trustees such as the right to give / lend capital or income to surviving spouse. It also empowers trustees to nominate capital to beneficiaries if required or convert trust capital into another type of trust.
a) Bereaved Minors Trust:
This trust can only be set up in a Will by a parent of the minor and it terminates when the child becomes 18. The trustee applies the income for education and maintenance until they reach the age of 18 and the capital and accumulated income will be released when the child turns 18.
The trustee also holds the power of advancement, allowing them to apply the capital for the child’s benefit (e.g., university, starting a business) before reaching the age of 18 if deemed appropriate.
b) Disabled person Trust:
• If you wish to benefit someone who is mentally or severely physically disabled through your Will, you can include a disabled person trust either in your Will or create it during your lifetime
• A disabled person trust can be set up as either a Discretionary or an Interest In Possession trust.
• Special tax rules apply during the lifetime of the disabled beneficiary, taxing the trust’s assets, income, and gains as if the disabled beneficiary owned them.
Due to the criticism that 18 years of age is too early to allow children to access capital, the solution is 18-25 Trusts. These trusts can be set up by the parent of a young person and the trust will continue until the child reaches the age of 25. This trust only can be created by a parent in a Will.
- These are the most flexible trusts. Trustees hold the assets for the benefit of beneficiaries. The trustees have power to share income and capital amongst the beneficiaries at their discretion. These trusts can last up to 125 years.
- You can create a discretionary trust in your Will and pass your property and money to trustees for the benefit of your children, grandchildren or any other person.
- These trusts fall under relevant trust regimes and are subject to Inheritance tax on creation, every tenth anniversary, and when trust capital is passed to beneficiaries.
- Accompanying your Will, you can provide a letter of wishes outlining how you desire the distribution of trust income and assets. Although not legally binding, in practice, trustees often follow this letter. Alternatively, trustees can exercise their discretion in distributing income and capital when the beneficiaries’ circumstances change.
- If you regularly donate to charity or have a specific interest in a worthy cause, you might consider creating your own charitable trust either during your lifetime or upon your death through your Will.
- Gifts to such trust are free of capital gains tax and inheritance tax. The income arising will not generally be assessed to tax.
- Charitable trusts have the potential to last indefinitely, creating a lasting memorial for your philanthropic endeavors.
Charitable trusts can last forever- a truly lasting memorial.
Disclaimer: The information on the Apex Estate Planners Ltd website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties express or implied
How can we help?
Here at Apex Estate Planners, we want to make the process of putting important documents in place as easy as possible. We recognise that many of our clients have busy lives so we can visit you in the comfort of your own home and at a time that suits you. Our staff are all legally trained to review the legalities and tax implications of making a Will, take instructions, and answer all of your questions. We will also return to you to ensure all legal documents are signed correctly.
Get in touch with us today.
Disclaimer: The information on the Apex Estate Planners Ltd website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties express or implied
