Estate planning is not just about deciding who gets what after you pass away; it’s also about protecting your assets from potential threats, such as creditors and divorce settlements. One of the most effective ways to safeguard your wealth and ensure it is passed down according to your wishes is to include a trust in your Will. At Blackstone Solicitors, we help clients across England and Wales create trusts within their Wills to protect their assets and provide peace of mind for the future.
This article will explain how trusts in Wills work, the types of trusts that can protect your assets, and why they are particularly effective in shielding your wealth from creditors and divorce.
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What Is a Trust in a Will?
A trust in a Will, also known as a testamentary trust, is a legal arrangement that comes into effect when you pass away. It involves placing your assets under the control of trustees who manage them on behalf of your chosen beneficiaries. Trusts provide a structured way to manage and distribute your estate, offering greater control and protection than a simple Will alone.
Unlike other types of trusts that are set up during your lifetime, testamentary trusts are established through your Will and only become active upon your death. They can be tailored to suit your specific needs, allowing you to decide how, when, and to whom your assets should be distributed.
How Trusts in Wills Protect Your Assets
Including a trust in your Will can protect your assets from various potential threats, including creditors, financial mismanagement, and the impact of divorce. Here’s how trusts work to safeguard your wealth:
- Shielding Assets from Creditors
If a beneficiary is facing financial difficulties, creditors may attempt to claim their inheritance to settle debts. Assets held in a trust, however, are generally not considered part of the beneficiary’s personal estate and are therefore out of reach from creditors. The legal structure of the trust ensures that the assets are protected, allowing them to be managed and distributed according to your instructions rather than being used to pay off debts.
For example, if your child is facing bankruptcy, their inheritance held in a trust would not be directly accessible to creditors. Instead, trustees can manage and distribute funds in a way that supports the beneficiary without exposing the assets to legal claims.
- Protecting Assets in the Event of Divorce
Divorce can have a significant financial impact, often leading to the division of assets between spouses. Trusts in Wills can offer protection by keeping certain assets outside the direct ownership of the beneficiary, meaning they are less likely to be included in divorce settlements.
In divorce proceedings, assets held in trust are usually considered separate from personal assets, as the beneficiary does not own them outright. Instead, they are managed by trustees according to the terms of the trust. This distinction can help prevent inherited wealth from being divided as part of a financial settlement, ensuring that family assets remain within the bloodline.
For instance, if you leave assets in a trust for your child and they later divorce, the trust can help protect those assets from being shared with their ex-spouse. This is especially important for families who want to preserve generational wealth.
- Controlling How and When Beneficiaries Access Assets
Trusts give you the ability to set conditions on when and how beneficiaries can access their inheritance, which can prevent reckless spending or misuse of funds. This is particularly useful if you have concerns about how a beneficiary might handle their inheritance, whether due to young age, financial immaturity, or external pressures.
Trustees, whom you appoint, are responsible for managing the trust assets according to your instructions. This level of control helps ensure that your wealth is used in a manner that aligns with your wishes, providing ongoing protection for your beneficiaries against financial risks.
- Minimising Family Disputes
By clearly outlining how assets should be managed and distributed, trusts can reduce the potential for disputes among beneficiaries. This is especially beneficial in complex family situations, such as blended families or where there are competing interests. Trusts provide a clear, legally binding framework that trustees must follow, helping to prevent conflicts that could arise from differing expectations or misunderstandings.
Types of Trusts Commonly Used for Asset Protection
There are several types of trusts that can be included in Wills to provide asset protection. Here are some of the most commonly used trusts that offer shielding from creditors and divorce:
- Discretionary Trusts: Discretionary trusts provide trustees with the flexibility to decide how and when to distribute assets to beneficiaries. This flexibility allows trustees to make decisions based on the current circumstances of each beneficiary, such as shielding assets from a beneficiary who is experiencing financial trouble. Since beneficiaries do not have a direct right to the assets, discretionary trusts offer strong protection against claims from creditors and divorcing spouses.
- Life Interest Trusts: A life interest trust allows a named beneficiary, such as a spouse, to benefit from the income generated by the trust’s assets during their lifetime, without granting them ownership of the assets themselves. The capital remains protected and ultimately passes to other beneficiaries, such as children, after the life tenant’s death. This structure is particularly useful in second marriages or blended families, as it provides for a spouse while protecting the underlying assets from being included in their estate or subject to claims.
- Protective Trusts: Protective trusts are specifically designed to protect a beneficiary from their own financial mismanagement or external threats such as creditors. These trusts typically limit the beneficiary’s access to the trust’s assets, ensuring that the capital is preserved and used responsibly over time.
- Bare Trusts: Bare trusts hold assets on behalf of a beneficiary until they reach a certain age, usually 18. While simpler than other trusts, they can still provide protection during the period in which the assets are held in trust. However, once the beneficiary reaches the specified age, they have full control over the assets, so this type of trust may not provide the same level of long-term protection against divorce or creditors.
Setting Up a Trust in Your Will
Creating a trust within your Will requires careful planning and the guidance of a legal professional. Here’s an overview of the steps involved:
- Seek Expert Legal Advice: Consult a solicitor experienced in estate planning and trusts, like those at Blackstone Solicitors. We will help you understand the different types of trusts available and advise you on which is best suited to your needs and circumstances.
- Choose Your Trustees: Trustees play a crucial role in managing the trust, so it’s essential to choose individuals who are trustworthy, competent, and able to act impartially. You can appoint family members, friends, or professional trustees, depending on the complexity and requirements of the trust.
- Define the Trust Terms: Clearly outline the terms of the trust in your Will, specifying how the assets should be managed, who the beneficiaries are, and any conditions for distribution. This clarity will help ensure that your intentions are followed and provide a robust defence against any claims.
- Draft Your Will: Your solicitor will draft the Will, incorporating the trust provisions to ensure it reflects your wishes accurately and complies with legal requirements.
- Review Your Trust Regularly: Life circumstances change, and it’s important to review your Will and trust periodically to ensure they remain relevant and effective. Regular updates can help keep your estate plan aligned with your current situation.
Final Thoughts
Trusts in Wills offer a powerful layer of protection for your assets, safeguarding them from creditors, divorce settlements, and other financial risks. By providing control over how your wealth is managed and distributed, trusts can help preserve your family’s legacy and reduce the stress and uncertainty that often accompany inheritance disputes.
If you’re considering setting up a trust in your Will, contact Blackstone Solicitors today. Our experienced team is here to help you make informed decisions and provide peace of mind for you and your loved ones.
How we can help
We have a proven track-record of advising upon all aspects of private client work. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.to incorporate, what kind of ownership
How to Contact Our Private Client Solicitors
It is important for you to be well informed about the issues and possible implications of setting up a Trust in Will. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Trust solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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