A trust is a vital mechanism that can give you more control over the distribution of your estate after you pass away. By establishing a trust in your will, you can save on Inheritance Tax, assign gifts to beneficiaries who do not yet exist (such as future grandchildren), manage inheritance on behalf of someone who lacks the capacity to make their own decisions, or give the power to someone else to decide.
The experienced wills and probate solicitors at Percy Hughes & Roberts can help you to identify the right type of trust to meet your needs, establish the trust in your will, and understand the Inheritance Tax savings and other advantages that will apply.
Based in Birkenhead, our expert team has been providing services throughout Merseyside, the Wirral and the wider North West area for over 100 years. With our experience, we can make it easy to create a will that meets your requirements, and ensure your estate is managed according to your final wishes.
Speak to Mark Cotson, Head of Wills & Probate at Percy Hughes & Roberts, to learn about our range of will trust and tax planning services. Call us today on 0151 666 9090, or complete our online enquiry form to arrange a call back at a convenient time.
Setting up a trust in a will: how our solicitors can help
The wills and probate solicitors at Percy Hughes & Roberts can provide a number of vital services related to will trusts, including advising you on choosing the right type of trust. We can help you to set up a trust that meets your needs, choose trustees and specify their powers and responsibilities, estimate the Inheritance Tax implications of your decisions, and more.
There are several potential advantages to will trusts, and you need to identify the structure and type of trust that will work best. Setting up a trust can be a complicated process, and it is vital to seek expert support and advice to find the right trust to suit your needs.
The most common types of trust include:
- bare trusts
- discretionary trusts
- interest in possession trusts / life interest trust
- accumulation trusts
- settlor-interested trusts
- mixed trusts
The team at Percy Hughes and Roberts can advise you on choosing the best type of trust to achieve your goals, and help you to meet the legal requirements that are needed to establish your trust. This will ensure that your trust is legally binding and suitable for the purposes you intend.
By choosing the right type of trust you can reduce the amount of Inheritance Tax your beneficiaries must pay on your estate; gain more control over the management of a business, valuable property or other assets in your estate; or distribute assets to beneficiaries who do not yet exist, like future grandchildren. As such, it is vital to seek legal advice if you want to set up a trust.
Why choose us?
Percy Hughes & Roberts has delivered expert advice and legal services to clients throughout the Wirral, Liverpool, Merseyside and the wider North West for more than a century. The care and attention we provide and the trust we build ensures that our clients feel secure in the services we provide.
We are regulated by the Solicitors Regulation Authority and have received several industry accreditations, including Lexcel, the Law Society's quality standard, recognising our good work on behalf of our clients.
Whether you need to create a trust for inheritance tax purposes, to provide for a surviving spouse or children who have not yet turned 18, or for any other reason, our expert solicitors can help.
FAQs About Trusts
How do I set up a trust?
To set up a trust, you must include a provision in your will to identify the type of trust and provide instructions on how it should be managed. While this may sound simple, it can actually be very complicated. This provision must include specific instructions, including:
- naming your chosen trustees;
- naming your beneficiaries (under certain conditions, depending on the nature of the trust you want to establish);
- assigning assets to the trust; and
- leaving instructions for trustees, to determine how they should manage the estate.
Often, a trust will need to meet additional requirements in order to be legally binding. As such, it is best to seek professional advice and have an experienced probate, wills and trusts solicitor draw this up on your behalf. The team at Percy Hughes & Roberts has years of experience in trust law, and we can advise you on the best type of trust and structure to meet your needs.
How should I choose my trustees?
In many types of trust, the trustees are responsible for managing assets and distributing gifts to your beneficiaries (as per the terms of the trust). Given the significant responsibilities that come with the role, it is essential to carefully consider who you appoint as a trustee.
It is usually best to choose at least two trustees, as they must agree on any distributions made by the trust. In this way, you can avoid impulsive decisions and ensure that distributions are carefully considered before they are made.
Trustees must be over 18 years of age and have the mental capacity to make decisions. Aside from these requirements, and barring any legal disqualifications from acting as a trustee, you are free to choose anyone.
You should choose someone you trust implicitly to act in the best interests of the beneficiaries and follow the terms of the trust. Ideally, your trustee(s) should have some knowledge of financial and legal matters or be willing to seek professional advice when necessary. Their role may include managing investments, handling tax matters, and meeting the legal requirements of administering a trust.
It is beneficial to choose someone who is familiar with your intentions and wishes, as they can make decisions that align with your objectives. Make sure your chosen trustees understand the commitment they are making, because fulfilling this type of role can be time-consuming and responsibility may last for many years, in some cases.
If you are unable to identify a suitable person, or if your trust is particularly complex, you may wish to consider appointing a professional trustee, such as a solicitor. A professional trustee can provide a higher level of expertise and reduce the burden on your family and friends.
What are the different types of trust?
There are several different types of trust that may be appropriate for you, depending on your circumstances. We have listed the most common types of trust above, and here, we will explain more about how each one works.
A bare trust is the simplest form of trust. It gives the beneficiary an absolute right to the trust's assets and any income generated from them. Bare trusts are often used to transfer assets to bereaved minors, and specify that these beneficiaries will receive full control once they reach the age of 18. As such, trustees have no discretion over the management or distribution of the trust assets in these cases.
In a discretionary trust, the trustees are given full control over the distribution of assets held by the trust and any income it generates. This means they can decide how much beneficiaries receive, and when - it is called a "discretionary" trust because these decisions are made at the trustees' discretion.
However, while the trustees control the distribution of assets and income, they cannot decide who should be a beneficiary. Only parties named in your are eligible to receive gifts, so this affords you a degree of control over how your estate is managed.
The flexibility of this structure can be useful in situations where the needs of beneficiaries will change over time, such as when providing for children or grandchildren. Discretionary trusts can also help protect assets from potential creditors, or in case of divorce.
Interest in Possession Trust / Life Interest Trust
An interest in possession trust, also called a life interest trust, is designed to provide for a single beneficiary for their lifetime. A named beneficiary (called the 'life tenant') has the right to receive any income generated from the trust assets for their lifetime (or a fixed period as specified in your will) - although, they do not have any right to the assets themselves.
Upon the life tenant's death, or at the end of the fixed period, the trust assets pass to the other beneficiaries named in the will. This type of trust is often used to provide income for a surviving spouse while preserving the trust capital for future generations, with the spouse named as the life tenant and any children named as the remaining beneficiaries.
This type of trust is designed to provide financial support for beneficiaries who are under a specific age, usually 25. If the assets accumulate income this will be added to the trust capital; or, if specified in your will, the trustees may be able to distribute it among the beneficiaries for their maintenance and education. Once the beneficiary reaches the specified age, they become entitled to the trust capital.
A settlor-interested trust allows the person who establishes the trust (the settlor) to be included as a beneficiary. Naturally, this only applies before you die and is not suitable to be included in a will, but may form a valuable part of estate and tax planning.
Settlor-interested trusts can be useful in situations where the settlor wishes to retain some benefit from the trust assets while still providing for others, such as their spouse or children.
A mixed trust is one that combines multiple types of trust, as listed above. For tax purposes, the separate parts of the trust are subject to the laws that apply to that type of trust specifically.
What happens if I die without a will?
When a person dies without a valid will in place, they are considered to have died 'intestate' and the distribution of their estate is governed by the UK's intestacy laws. These may not align with the deceased's wishes, so it is important to create a will and make the important decisions about the distribution of your estate for yourself.
You can find out more information about who will inherit your estate in our dedicated guide to dying without a will and the rules of intestacy.
Is it worthwhile to establish a trust for Inheritance Tax purposes?
The executor of your will must pay Inheritance Tax on your estate for any value that exceeds £325,000. Inheritance Tax is charged at 40%, and as such, can represent a significant bill for high-value estates. By putting assets into a trust, you can benefit from a lower tax rate on these assets.
This means that if your estate is worth significantly more than £325,000, it is often worthwhile to create a trust during the estate planning process. If you are unsure, you should speak to a wills and probate solicitor about your plans.
You can also reduce your tax liability by donating part of your estate to charity, and through other methods, so you should consider your options carefully when planning for the management of your estate.
What is a Disabled Person’s Trust?
A Disabled Person's Trust is designed to provide for someone who is mentally or physically disabled, or who lacks the mental capacity to manage their own finances. The trust ensures that the beneficiary has financial support but, in most cases, does not affect their entitlement to means-tested state benefits. This may also be known as a Vulnerable Person's Trust.
Setting up a trust for a disabled family member can also be a secure way to leave assets to that person in your will, or to manage a compensation payment on their behalf. However, it is important to understand who can qualify as a beneficiary and whether this type of trust has the right structure to meet your needs before you proceed to set it up. It is best to speak to an expert trusts solicitor for support throughout this process.
For a person to qualify as a 'vulnerable' or 'disabled' beneficiary and benefit from the tax advantages of a Disabled Person's Trust, they must meet certain criteria. Generally, they will qualify if they are eligible for certain disability benefits, including:
- Attendance Allowance (AA)
- Disability Living Allowance (DLA) care component at middle or higher rate
- Personal Independence Payment (PIP) daily living component
- Armed Forces Independence Payment (AFIP)
These are not the only ways to determine whether or not someone will be eligible to be the beneficiary of a trust. If you are setting up a Disabled Person’s Trust, speak to a solicitor about whether it is the most suitable structure to meet your needs.
Once you have established the trust, it will be managed on an ongoing basis, which also means that you can add assets to the trust after the fact provided this is not limited by the trust agreement. There are many different factors and provisions that can affect the nature of a trust for a disabled person, and this is another reason that legal advice is crucial - the trust agreement may determine whether or not the beneficiary can access trust funds directly, for example, and also specify the roles of trustees.
Any additions to the trust may be taxed or have tax implications for the beneficiary, so this is something to consider when you first establish the trust. If you set up a Disabled Person’s Trust in your will, for example, this may have Inheritance Tax implications that can affect the beneficiary negatively, so it is important to consider these factors well in advance.
Contact Percy Hughes & Roberts
If you need to write a will, establish a trust or plan around Inheritance Tax liability, contact the experts at Percy Hughes & Roberts Solicitors. Call us today for a no-obligation phone consultation.