Wills and Trusts
A will trust is something that is created in your will to allow you to protect the property you want to pass on to your family, that will only take effect when you pass away.
Will Trusts and Property
Will trusts are commonly used by married couples and civil partners and are set up when the family home is split – meaning each partner has 50%. In the will, the partners don’t leave their share of the property to one another and instead, they leave it in a trust which is activated when the first partner dies.
Nil rate band trusts were a common way to avoid inheritance tax, as each partner would split the estate into halves so their half was not subject to any inheritance tax deductions and would, therefore, be below the nil rate band.
Transferable Nil Rate Band
Since 2007, the need for nil rate band trusts in property has lessened due to the introduction of transferable nil rate. A transferable nil rate band arises when one party to a marriage or dies and the amount of their estate that is chargeable to inheritance tax does not use up all of the nil rate band they are entitled to. The unused part can now be transferred to the surviving spouse or civil partner when they die.
Will Trusts and Long-term Care
The cost of care can be expensive but using a will trust when your partner dies is a way of avoiding the steep costs of care. If your partner dies, you have the right to remain in the house you shared together. If the time comes when you need to pay for care, only your share of the property is assessed (when you require care, your assets are assessed to determine how much the cost of your care will be).
Will Trusts and Inheritance
In order to avoid sideways disinheritance, you can set up a will in trust. Sideways disinheritance is when children do not inherit their parents share of an estate because they have remarried. If the surviving partner fails to make provision in their children for a new will, there’s a risk that everything will go to their new partner instead.
Are There Any Alternatives To Will Trusts?
After hearing about will trusts, you may have decided they aren’t quite what you’re looking for. If this is the case, then lifetime trusts may be of interest.
Lifetime trusts come into play straight away, wheres will trusts only come into play after death occurs. Your house will be a gift to the trust and you can still live in it. This means that if you need residential care, your house will not be accounted for when your assets are assessed, which theoretically means your care will be cheaper. There is a risk that local authorities will call this a deliberate deprivation of assets and will, therefore, assess you as though your home was part of your estate, rather than in a trust.