What is a Will Trust?
If you make a Will (everyone should do so), and part or all your estate is not to pass to your beneficiaries immediately, a Will Trust is formed.
There are various reasons why you would wish to do this. It may be that some of your beneficiaries are minors (under 18) or under the age you wish them to benefit, for example some parents or grandparents wish their descendants to receive their money when they are ‘more sensible’, i.e. 21 or sometimes older. Some people wish there to be some discretion as to when beneficiaries receive their money – to drip feed money so that they do not spend it all at once, or to assist vulnerable beneficiaries who would not benefit from having all of their inheritance in one lump. This is known as a Discretionary Trust.
Sometimes, particularly with second marriages, a spouse wants to ensure that their surviving spouse is cared for and has an income and roof over their head, but ultimately that their children from their first marriage receive the capital when the survivor dies. This is known as a Life Interest Trust.
Who looks after the money?
Unless you appoint separate people, the Executors in your Will become the Trustees. Executors have the job of dealing with your estate when you die, sorting out what assets you have and following the terms of your Will. If they cannot pay out the whole estate, due to there being children or others who will not have their share immediately, they become Trustees and look after the money until the whole of the estate has been paid out or distributed.
Who should you appoint as the Trustees?
There must be two Trustees and it is advisable to also appoint a reserve. An ideal Trustee should be someone you trust and someone that understands your wishes. It is advisable to leave a Letter of Wishes to give guidance to the Trustees.
Trustees should know the beneficiaries, but be relatively strong in character in the case of a Discretionary Trust, as they will be dealing with beneficiaries who may be difficult. However, where Trustees have to exercise discretion, they must do so in ‘good faith’.
The Trustees do not need to be financial experts, but they should take appropriate financial advice when considering investments. They must also take on board duties to deal with tax returns and annual accounts. The Trustees can also seek legal advice if necessary, particularly if the affairs are complicated. Any reasonable costs for seeking professional advice is paid for out of the estate.
It is essential to seek advice from a Solicitor when making a Will, particularly if there is likely to be a Trust.