What is a Will Trust and why might you need one?Posted on: 13 April 2016 by 50connect Promotions
How to use Will Trusts to protect your share of jointly owned assets.
For most of us our property is our most valuable asset and one that we naturally want to pass on to our children. However, the way in which the Law of Succession operates in the UK and Wales this is not always guaranteed.
For married couples how it works is this…. on first passing, the law of succession dictates that ownership of any joint assets is automatically passed to the surviving partner. They are then at liberty to do with it as they wish.
You may, of course want this to happen which is great, nice and simple. But, what are the risks of allowing ownership to just simply pass along?
Say for example the surviving partner remarries. Marriage revokes any previous Will and your share of the property becomes part of their marital assets. Meaning your children, or whoever you want to inherit your share, may not see a penny. Children from previous marriages could very easily end up disinherited also, this is called sideways or accidental disinheritance for obvious reasons! If the surviving partners goes bankrupt your share will become part of their assets and, similarly if they go into care your share will be used to pay their fees.
Can you protect your share?
The good news is you can, and it’s relatively straightforward. In the case of properties you can simply split the ownership and place your share into a Will Trust. Basically for married couples a Will Trust enables each person to decide who inherits their share of the assets once they have BOTH gone.
From joint tenants to tenants in common
Splitting ownership of a property takes you from being ‘joint tenants’ to ‘tenants in common’. Whilst this change has no effect on your day to day living arrangements – in fact you can purchase a property as tenants in common – legally it means that you both now actually own your part of the asset. You can then write a Will that includes a Property Trust in one form or another which leaves your share to your children or whoever you wish.
Protecting the surviving partner
Don’t worry, by severing the tenancy on your property does NOT mean that on first passing the surviving partner will be asked to leave or sell the property. Their right to enjoy the asset is protected by using a Will trust, they don't own 100% of it and can only dispose of their share.
Typically you would grant your partner a ‘right to reside’ in the property. This can be for a fixed term, until they remarry, for life or until they go into care. They can usually downsize if they wish and, can even draw an income from any profit.
Trusts and care fees
You may have heard about people, in a bid to avoid paying care home fees, placing their properties in their entirety into Trust. As far as your local authority is concerned these kind of ‘whole asset’ trusts are considered a deliberate deprivation of assets and will take it to pay care fees anyway. That said however, a very useful effect of severing the tenancy and establishing a trust over the property is that the share in trust cannot be taken into account by a local authority if the survivor goes in to care. However, the whole property could be taken into account if you both enter residential care accommodation.
Wills Trusts are not just for jointly owned assets. If you want someone to benefit from an asset - perhaps by living in your home after your death or drawing an income from an asset - but don’t want them to own it outright or be able to sell it, then your Will can contain a ‘term interest’, ‘life interest’ or ‘discretionary trust’. You can give directions about who the asset eventually passes to and when.
If one or more of your potential beneficiaries is disabled a ‘disabled person’s interest trust’ (vulnerable beneficiary trust from April 2013) can be established which has certain tax advantages and can protect any means-tested benefits they are in receipt of.
Who should consider Will Trusts?
It should definitely be a consideration for all married couples. Those with children from previous marriages or who often find themselves in higher risk situations be it through their job or weekend adrenalin junkies. Those with a family history of mental health problems or serious illnesses such as cancer. People with substantial savings they want to ensure pass to their chosen beneficiaries or just those concerned with threats to their estate in general should all consider a Will Trust.
Find out more
Future Legal Services are currently offering 50connect readers a 15% discount on Will writing – this offer includes single and mirror Wills.
We also offer a number of different Trust options and you can include one or more trust in your Will for a flat fee of just £199.
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