Why do you need a will and a trust?
The reason you would make a will is so you have clear knowledge and clarity of whom and where your money and assets are going to go after your death with minimum delay and charges.
Although these are good intentions, you may not have considered all of the ‘what ifs’ which would affect those receiving the inheritance by a will.
Not addressing any inheritance tax charges or delays places a big burden on the beneficiaries prior to receiving the inheritance.
Hereare some answers to the most common questions regarding 'why do you need a will and a trust?'
What if your spouse remarries after being widowed?
- Legally, the new spouse is likely to benefit from their death, which could lead onto your grandchildren’s inheritance to be taken away/disinherited.
What if your beneficiaries were to become divorced or separated?
- Then your estate could end up being left to people who you may have never met before.
What if your beneficiaries were to suffer financial hardship?
- Creditors have the right to seize the inheritance that they could have benefited from.
What if a beneficiary is reliant on state benefits?
- If you leave them money through a trust, then that money wouldn’t fall under your estate and then wouldn’t be considered for IHT reasons.
What if a beneficiary isn’t sensible enough with money to receive their inheritance?
- It is possible for them to receive the inheritance in stages as long as the money is being supervised by someone who is trusted.
- You may choose to do this if the beneficiary struggles to handle money or has gambling or drug addictions, to reduce the likelihood of more addictions.
What if your will is challenged?
- Under the ‘Provision for family and dependants act 1975’ the only people which would be able to challenge your will are those who have been disinherited fully or left only ‘unreasonable provision’. However, if you form a trust then it makes it much more difficult for anyone to be able to make a challenge.
- The trust would only be given to those named before your death and there is no need to change ownership as all of the assets would go to the beneficiaries named.
What if the beneficiaries cannot pay inheritance tax straight away?
- Even if your assets are given to a trust before death, it doesn’t necessarily mean you will avoid inheritance tax but it does mean you can avoid probate and the trusts beneficiaries can access the assets immediately.
What if, after receiving a large estate minus death duties the beneficiary dies prematurely?
- Leaving assets to someone by a trust means those assets will never be accounted in the beneficiaries personal assets, meaning you can pass it on through generations for as long as the trust goes on for (usually 120 years), reducing IHT for them in the future.
If you have any more questions regarding 'why do you need both a will and a trust?', do not hesitate to contact us and we will be more than happy to give you the best experienced advice.