Some examples of using Trusts
Below are a few examples why you might use Trusts to meet your estate planning needs
The Surviving Spouse Remarries and an Asset Preservation Trust
If you make Mirror Wills they are usually set out so that everything (or nearly everything) passes to the spouse on first death. It then gets passed to the children on the second death. Unfortunately this rarely works out as planned.
If the surviving spouse remarries then the original Will is revoked. If a new Will is not made, then a large proportion of the estate would pass to the new spouse. If they get divorced, a large proportion of the assets might leave the family. The Will could also just get rewritten as circumstances change.
A Trust could be created on the first death, and half (or a different proportion) of the assets could be put into the trust, for the eventual benefit of the children, but whilst the survivor is alive, she might be able to borrow from the trust, or take income subject to the rules of the trust. This is not usually affected by marriage, divorce or the survivor writing a new Will.
This can provide protection of the assets for the children or final beneficiaries, whilst providing the survivor with backup funds if required.
A Run of Bad Luck and a Family Trust
One of your potential beneficiaries is having marriage problems which you do not know about. This has caused mental health issues, and they have turned to drink and recreational drugs, racked up some debts and are generally in a bad place. You pass, and your estate is distributed at the time that your beneficiary is getting divorced.
If the beneficiary was due to receive 50% of your estate, then they might lose 50% due to the divorce settlement. They might also use the money on drink and drugs etc. If a trust was set up in the Will, then the funds could be held in the trust until your beneficiary was in a better place. This would help ensure the money was kept in the family, where it could be taken away, or be used to cause harm to your loved ones.
This is a rather dramatic example, but divorce, alcohol and drug abuse, mental health problems and financial problems are all modern day issues, and could be affecting a loved one. Using a trust can protect against one or all of these potential issues causing a multitude of problems.
Lifetime trusts can help avoid probate and potentially inheritance tax when you die. Will trusts that are set up on your death can control the distribution of your assets, protecting them from care home assessment, divorce, bankruptcy and other financial problems of beneficiaries, the complications of a surviving spouse remarrying and much, much more.
Trusts can also be used to protect assets for vulnerable beneficiaries such as those that are disabled, mentally ill, or minors under 18.
A Disabled Beneficiary and a Disabled Beneficiary Trust
A disabled beneficiary might receive care and support from the state. They might have no need for financial assets themselves, and might be excluded from your Will accordingly so that the assets can be used for other purposes at the discretion of your loved ones.
In this instance, the local authority might challenge your Will, as no provision was provided for a dependent. This could result in a lengthy court battle and / or money being distributed differently to how you intended.
A disabled beneficiary trust could be used to put assets into for the disabled beneficiary, to be used at the discretion of the trustees you appoint. This will not be classed as an asset of the disabled beneficiary, so they will not be assessed. On the death of the disabled beneficiary assets can be distributed in accordance with how you set the trust up.
Children Under 18 and a Childrens' Protective Trust.
If you do not specify an age for a child to inherit, or do not have a Will, then a trust will be required until they reach 18. Before age 18 they might need funds to maintain the standard of living you might require for them, at age 18 they might not be responsible enough to put the money to good use.
A Childrens' Protective Trust can determine what age they receive the money (up to age 25) and you can allow withdrawals for the child and / or their guardian to ensure they are brought up the way you wanted them to. The trustees can review each important milestone or request, and make decisions based on your letter of wishes that can accompany the trust.
Goodwills Legal Services Ltd is a regulated by the CLC, and is also a STEP member accredited firm. One which is owned by two solicitors, both of which are bound to abide by the code of SRA. STEP is the Society of Trust and Estate Practitioners and one of the most regarded professional bodies in this field.
The range of Trusts available through Goodwills Legal Services Ltd.
Click a link below to see more information about that type of Trust and how it can be beneficial to you when estate planning or making your Will.