Often I am told ‘all we need is a simple Will’ and then as we go through the information gathering process and I discuss the many options around estate planning, we inevitably touch on a few alternative options to a basic Will. This is not to say that everyone needs a trust, nor is it to say that if you fall into a category of people that a trust is suitable for, you MUST have a trust. Trusts are designed to help your beneficiaries manage their inheritance in a manner that could save them lots of money. I am going to just run you through 3 of the most ‘common’ trusts I see and deal with. (names of certain trusts may differ between advisors, but they should all cover specific needs.)
Life Interest Trust
A Life Interest Trust (LIT) primarily focuses on assets that are properties. The trust enables you to leave your beneficial share of the property within trust. It allows an individual (usually your spouse or partner) the ability to benefit from the property for the remainder of their life or a designated period. (This is not to be mistaken for a simple ‘right to reside’ clause which can be very vague and cause huge issues for all involved). A LIT stipulates a duration of the trust, it stipulates who the liferent is, but more importantly, what the liferent can do. You can choose to allow the liferent the flexibility of moving, using any income created from the property, co habit etc; you set the ‘rules’ of the trust.
A Discretionary Trust is almost the most ‘generic’ of trusts, you can set out guidelines within a letter of wishes for the reason for setting up the trust. It is the framework of the majority of trust we deal with. You nominate who you wish to be your Trustees, these people are then responsible for whatever is placed in that trust, and they act under your instructions set out. The fact this is a discretionary trust means that the trustees have the ‘discretion’ to do what they feel is the most appropriate/beneficial for the beneficiaries of the trust.
Vulnerable Persons Trust (VPT)
A Vulnerable Person Trust (VPT) is designed specifically to protect any vulnerable beneficiaries within a Will. The vulnerability can be anything from disabilities to addictions. I see many clients that are worried to leave their estate to children, family or friends due to the fact that the person may not be able to properly manage their funds. This is when the VPT is perfect, it enables you to leave your estate to the people you wish, knowing that the funds will be looked after by people you trust and nominate yourself.
I have used the term Trustee many times throughout this article, so I feel it is only right to touch on what they do. Essentially your trustees will be the guardians of the funds/assets you place in trust. They have the discretion to make decisions on how, what and when your beneficiaries inherit from the trust. Anyone can be a trustee; however you should note one thing. The clue is in the name. TRUSTees should always be people you TRUST to act as you wish; but also in the best interest of the beneficiaries. For that reason, family & friends tend to me my preferred choice there is sense in nominating a professional trustee, however be clear with the fee’s they would charge to do this.
In short, Trusts are not there to be restrictive to the beneficiaries, they are there to ensure that the beneficiaries benefit from their inheritance in the best way possible. If you would like more information regarding how a trust may benefit being added to your Will, please call: 01603 981971 or email: firstname.lastname@example.org.