UK Trusts In Wills: Avoiding Common Mistakes

When considering how to protect your family’s financial future, writing a will is an essential step. However, for those with more complex estates, or when there are vulnerable beneficiaries, simply drafting a basic will may not be enough. Incorporating a trust within your will can provide additional security and control over how your assets are distributed after your death. However, while trusts are a powerful estate planning tool, there are several common mistakes that can cause unintended consequences. Avoiding these pitfalls requires careful planning and expert legal advice.

If you’re thinking about setting up a trust in your will, it’s crucial to work with a knowledgeable solicitor who can guide you through the process and help you avoid common mistakes. At Blackstone Solicitors, we have years of experience assisting clients across England and Wales with their estate planning needs, ensuring that their wishes are honoured and their assets are protected. In this article, we’ll discuss the most common mistakes people make when setting up trusts in wills and how you can avoid them.

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For a free initial discussion on how we can help you deal with the legal implications of creating a Trust in a Will, get in touch with us today. We are also experienced in dealing with all aspects of Wills and Probate and we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.

1. Choosing the Wrong Type of Trust

One of the most common mistakes is selecting the wrong type of trust for your situation. There are several types of trusts that can be included in a will, each designed for different purposes. Choosing the right trust requires a clear understanding of your estate, your beneficiaries, and your long-term goals.

Some common types of trusts include:

• Discretionary Trusts: Trustees have discretion over how and when the assets are distributed to beneficiaries. This offers flexibility but also places significant responsibility in the hands of the trustees.
• Life Interest Trusts: A life tenant (typically a spouse) has the right to receive income from or live in a property during their lifetime, but the capital or property is ultimately passed to another beneficiary (such as children).
• Bare Trusts: The assets are held by trustees until the beneficiary reaches a certain age, at which point they are entitled to receive the assets outright.

If you fail to choose the right type of trust for your needs, the trust may not serve the purpose you intended. For instance, if you want to protect a vulnerable beneficiary from spending their inheritance recklessly, a bare trust may not be appropriate, as it provides less control over how the assets are used once the beneficiary reaches a certain age.

Solution: Seek professional legal advice to understand which type of trust is best suited to your specific circumstances. At Blackstone Solicitors, we can help you weigh the options and select the trust that aligns with your goals.

2. Appointing the Wrong Trustees

Trustees play a vital role in managing and distributing the assets in your trust, so it’s critical to choose individuals who are both trustworthy and capable. Many people make the mistake of appointing trustees without fully considering the responsibilities involved. While it may seem logical to appoint family members or close friends, not everyone is suited to the role.

A trustee’s duties include managing the trust’s assets, making decisions in the best interests of the beneficiaries, and ensuring that the trust complies with legal and tax obligations. This can be a demanding and complex role, especially if the trust is in place for many years.

Common Mistakes Include:

• Choosing trustees based on their relationship to the beneficiaries rather than their ability to manage financial matters.
• Failing to appoint a backup trustee in case the primary trustee is unable to act.
• Not considering the potential for conflicts of interest, especially if a trustee is also a beneficiary.

Solution: Carefully consider who you appoint as trustees. If you do not have someone who is both willing and capable, you can appoint professional trustees, such as a solicitor or accountant. At Blackstone Solicitors, we offer trustee services and can help ensure that your trust is managed professionally and impartially.

3. Failing to Review and Update Your Will

Life is unpredictable, and circumstances can change significantly after your will is written. A common mistake is failing to review and update your will regularly, particularly if there have been significant changes in your family dynamics, financial situation, or tax laws.

For example:

• You may have new beneficiaries, such as children or grandchildren, who should be included in the trust.
• A change in your financial situation could affect the value or distribution of assets in the trust.
• Changes to inheritance tax rules could impact the effectiveness of your trust in reducing tax liabilities.

If you don’t update your will and trust to reflect these changes, it could lead to complications or disputes among beneficiaries.

Solution: Regularly review your will and trust with your solicitor, especially after significant life events such as marriage, divorce, the birth of children, or the acquisition of new assets. Blackstone Solicitors can help you make the necessary amendments to ensure your trust remains aligned with your wishes and legal obligations.

4. Overlooking Tax Implications

Another common mistake is failing to consider the tax implications of setting up a trust. While trusts can be useful for inheritance tax planning, not all trusts offer the same tax benefits, and some may even trigger unintended tax consequences if not structured correctly.

For example:

• Inheritance Tax (IHT): Depending on the type of trust you create, the assets within the trust may or may not be subject to inheritance tax.
• Capital Gains Tax (CGT): If assets such as property or shares are transferred into a trust, capital gains tax may be payable on any increase in value since they were acquired.
• Income Tax: Trusts that generate income, such as rental income from a property, may also be subject to income tax, and the rates can vary depending on the type of trust.

Failing to plan for these taxes can reduce the overall value of your estate and leave your beneficiaries with unexpected tax bills.

5. Failing to Clearly Define Beneficiaries

It is essential to clearly define who the beneficiaries of your trust are. Vague or unclear beneficiary designations can lead to disputes among family members or leave your trustees uncertain about how to distribute the assets.

For example, if your will simply states that “my children” are the beneficiaries, this could lead to complications if you have stepchildren or adopted children. It’s also important to be specific about what each beneficiary is entitled to and under what circumstances.

Solution: Be as clear and specific as possible when naming beneficiaries and outlining the terms of the trust. At Blackstone Solicitors, we can help ensure that your will and trust are drafted in a way that leaves no room for ambiguity, reducing the risk of disputes after your death.

6. Ignoring the Long-Term Implications of the Trust

Trusts can last for many years, and it’s important to think about how your trust will function in the long term. Many people make the mistake of focusing solely on the immediate needs of their beneficiaries without considering how those needs may change over time.

For example, a trust set up for young children may need to continue for many years, during which time the trustees will have to make decisions about investments, distributions, and tax filings. If the trust is not properly managed, it could deplete the assets or fail to meet the beneficiaries’ needs in the future.

Solution: Consider the long-term implications of your trust and ensure that your trustees are prepared to manage the trust over time. At Blackstone Solicitors, we offer ongoing trust management services to ensure that your trust continues to operate smoothly and in accordance with your wishes.

Conclusion

Creating a trust in your will is one of the best ways to protect your family’s financial future and ensure that your assets are distributed according to your wishes. However, it’s essential to avoid common mistakes that could undermine the effectiveness of your trust. By working with experienced solicitors, you can navigate the complexities of estate planning and set up a trust that meets your needs.

At Blackstone Solicitors, we are here to provide expert advice and guidance at every stage of the process. Whether you need help choosing the right type of trust or appointing trustees, our team has the knowledge and experience to ensure that your trust is structured correctly. Get in touch with us today to discuss your estate planning needs and secure peace of mind for you and your loved ones.

How we can help

We have a proven track-record of helping clients create Trusts. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact Our Wills and Probate Solicitors

It is important for you to be well informed about the issues and possible implications of creating a Trust. However, expert legal support is crucial in terms of ensuring your wishes are met as you would want them to be.

To speak to our Wills and Probate 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.

Authored by Ben Posted in Blog, News Tagged as

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