Choosing the Right Type of Will and Trust

There will be some things that you may want to consider:

Are you married, in a civil partnership or single. Perhaps you’re living with someone. If you have minor children, who will look after them. Do they live locally with sufficient time and energy to do the job. Do you have any preferences regarding how they will be brought up? Do your guardians have sufficient funds to cover food, clothing, holidays, education?

Would you prefer to leave these sorts of things for the courts to decide.

Are you a widow/widower with a new family. Have you used any of the IHT allowance from your previous marriage under current legislation.  Perhaps you re-married after a divorce

You may run a business and trust whoever takes over your share to keep the wheels turning.

Let’s assume that perhaps your spouse is the right person, and has the time, skill and inclination to keep things moving forwards. They may prefer to sell your share of the business and it’s possible that you’ve already taken steps to cover these issues

Quite a few questions? It would certainly help people who are responsible for dealing with your affairs if they had a clear idea about your wishes.

 

Will Already Arranged – no problem

No will in place to date, but after due consideration, you may decide that you’d like to do something about it. That’s great! Step one on the ladder. Here’s a scenario:

You don’t want anything too complicated. Let’s keep it simple. A friend recently picked up a do-it-yourself will pack on a trip to the newsagent and you decide to follow suit. After filling it in, you’ll need a couple of witness signatures. One neighbour is duly obliging, but the other neighbour is out. The instructions say that the form needs to be signed by two people. Your daughter-in-law is in the kitchen, so how about her, after all your Son is a beneficiary.

Whilst this may be convenient, a beneficiary (and /or spouse) can’t sign as a witness and be allowed to benefit from the estate. A simple error, but it means that he can’t inherit his share.

This won’t apply to you; after all you’ve just read the above example. There may be other circumstances where you want to take advice.

People do make arrangements, but don’t always factor in any changes. Why use a trust when all you want is a simple, basic Will. This may seem to be the best way forward, and for some it is, but consider the following scenario:

John and Mary (married and recently retired) both have valid wills which leave everything to each other when one of them dies and then to their children Peter and Jane, on the second death. This may sound familiar, but when you examine it in a bit more detail there are a few assumptions which may cause a problem:

John expires leaving everything to Mary.

Mary decides to lift her spirits and books a cruise around the Caribbean.

Whilst the children are happy that she’s getting over things, they are surprised when, on return, Mum descends the gangplank with Simon.

After a whirlwind romance, Mary and Simon marry and set up home together.

The wallpapering takes precedence, and the paperwork takes a back seat.

They both settle down to live life together at a more leisurely pace.

Unfortunately, whilst driving back from the shops, Mary is distracted whilst passing the travel agents   and sadly doesn’t survive the ensuing crash. Fortunately no one else was hurt.

You’d never have predicted this happening – most people wouldn’t.

Because things weren’t reviewed after the wedding, and no new wills arranged Mary’s will is invalid (as marriage automatically revokes any existing will). She has died intestate.

The estate is less than £250 000 in value and consequently this means that 100% of her estate passes to Simon.

Rachel (Simon’s daughter from his first marriage) arrives to console Dad whilst reminding him that he’d promised to fund his grandchildren through University. Simon doesn’t want to make a fuss (with Rachel). A significant amount of the funds are soon transferred into Rachel’s account. Rachel apologises to Peter and Jane as she books the taxi to take her to the airport departure lounge. Peter and Jane are duly dismayed, particularly as this could have been avoided.

Here’s another scenario, which may seem pretty unlikely, but unfortunately isn’t as rare as you may imagine. Same circumstances as previously covered, but this time Mary and Simon did remember to make new wills.

Mary’s estate is placed into a flexible trust for Peter and Jane (and their families) to benefit from. The trustees are Peter and Jane, as this may seem obvious and it keeps things simple.

Things work well, and everyone is happy with the arrangements. Brother and Sister get on well together and there’s no dispute with distributing the assets appropriately.

Peter draws a modest amount to cover the cost of his forthcoming wedding. Peter’s new bride, Charity enjoys lavish holidays and can’t resist the roulette wheel between port stops.

Brother and Sister meet to discuss Peter’s latest request for funds, and depart from the meeting without a hug and a kiss.

As they are the only trustees, and can no longer agree on distributions, tempers can occasionally get frayed. If only Mum had considered appointing an additional trustee/s (perhaps someone impartial) this may have been avoided.

An appropriate trust in the will would have ensured that the intended beneficiaries have access to the funds whilst ring-fencing them from unwanted/undeserving individuals.

Will trusts enable you to set in motion plans which ensure that the right funds go to the right people at the right time.

They are widely used for asset protection and can help to make sure that any children or dependants aren’t disinherited through remarriage after death or from any future divorce settlements. The appropriate trusts are also used to ensure that disabled or vulnerable beneficiaries can have assets ring-fenced.

The above examples may seem to be unlikely; however they will hopefully show that the right decisions taken at the right time can make things significantly simpler. This is particularly important at a time when complex and confusing issues are certainly not welcome.

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