The terms ‘Will’ and ‘Trust’ are often confused. Whilst many people tend to know that they both have something to do with giving your assets to others, they are very different and serve different purposes. However, that’s not to say that the two are linked and complement each other.
First and foremost, everybody with any kind of assets, a partner and children should have a Will. A Will is a legally enforceable, signed (by you) and witnessed document that gives you, control and say as to what happens – not only to your assets and possessions – upon your death, but also, if your not married- who will be the guardian of your children. To not have one would be to die intestate and this creates serious issues and uncertainty for your family.
A will can also give you the opportunity to leave a legacy to a charity, reducing your IHT (Inheritance Tax Liability) as well as making clear details such as what kind of funeral arrangement you would like.
A Will is very much about financially providing for your family and possibly friends – once you pass on, as well as making it easier for them to deal with your affairs.
Family, friends and charities benefiting from your Will are called beneficiaries and these are detailed in your Will as are the ‘Executers’ – the people whom you appoint to ensure that the conditions and details of your Will are followed to the letter.
There are several types of trust. However, we won’t go into too much detail at this point. Put simply, is a legal arrangement to usually ‘ring fence and protect assets – often property. For example, a Right of Occupation Trust (sometimes referred to as a ‘Property Trust’) is created to allow you to protect your property so that you can ensure that it stays in the family. It helps to prevent local authorities assessing the value and using such an asset to pay for your care – should you need to go into a care home in older age.
A trust can also be used to help reduce taxes on your estate and in some cases avoid the need for a grant of probate altogether.
With any Trust, you will appoint ‘Trustee’s’ who will be responsible for holding a and managing your assets in your best interests and those of the appointed beneficiaries. This has to be done in accordance with the ‘Trust Terms’ – set out in a legal document called the Trust Deed.
A Trust doesn’t replace a Will, instead it supplements it. There will be assets such as cars, clothes, furniture and possibly jewellery that may not practical to place within a Trust and how these items such be distributed to beneficiaries should be detailed in your Will. Also, details of funeral arrangements and if you are not married and have dependant children, you need to detail who should be their guardians. You need to remember that if you’re unmarried, dying without a Will means that your partner, regardless of how long you have lived together, will not automatically inherit! Furthermore, if they are not the biological parent of your children they will have no parental rights following your death.