A Will is a legal document which determines the individuals who will benefit from your estate when you die. If you do not have a Will in place then rules of the law of intestacy will apply which means that your estate may not end up in the hands of those you wish. Your surviving spouse will not necessarily receive your entire estate and therefore it would not be the most tax-efficient disposal of your estate. Additionally, if you are not married there would be no entitlement for them under the rules of intestacy.
A Will is also important if you have young children as you can appoint a guardian for them and avoid the need to go to court. In addition, you may also have wishes with regard to when those children inherit their money. Under the rules of intestacy, children become beneficially entitled upon attaining the age of 18 and many people believe that this is too young for children to be handling large sums of money or property.
You should also consider a Will if you have complex family arrangements – perhaps you have children from a previous marriage and wish to protect their inheritance or perhaps you have a shareholding in a limited company and wish to place this into a trust to avoid wasting your nil rate band.
Life Interest Trust Wills
The family dynamic is becoming increasingly more complicated and therefore the need to protect succession interests in these family structures is becoming extremely important. Most commonly, the issues arise in the context of second marriages where children from those previous marriages are concerned and where spouses are concerned about care home fees in the future.
The life interest trust Will is an extremely useful vehicle for ensuring that you can protect an element of your estate so that it always reaches its intended beneficiary. Most clients will create the trust with the intention of benefitting the surviving spouse (including civil partners and even perhaps cohabitants) for the rest of their lives with the trust asset then going to their intended beneficiary, such as the children or charity. The surviving spouse will be entitled to remain in the property or replacement property (such as if they downsize) for the remainder of their lives or until such triggering event occurs which terminates the trust arises, thus providing protection to them.
The benefit that many clients relish is that the portion of the estate that is placed into the life interest trust is effectively ringfenced and the life tenant does not own the property, they are merely benefitting from it which means that it will not be included in care home fee assessments. There are not many restrictions as to what assets can comprise the trust, but you would want income producing assets – we find that many clients place their half share of the property into the trust but you may also place cash assets in as well. The income that the trust produces, such as dividends from investments or rental income is paid to the life tenant.
This type of trust is recommended where there are children from previous marriages on the scene because it allows for you to guarantee that your children will ultimately benefit without risk of being omitted from the surviving spouse’s Will if they were to remarry, for instance. Essentially, the trust assets do not belong to the survivor, but the Trust, and so they cannot be redirected by the survivor’s Will.
Another benefit is that the trust is inheritance tax neutral. Placing the assets into the trust upon death for the benefit of your spouse (or civil partner) will be treated as though it was an absolute gift and therefore exempt from inheritance tax in the same way as a direct gift in your will. It is important to remember, however, that it is not a direct gift and the survivor does not physically own the assets.
Our private client solicitors at KJ Cox Solicitors have a wealth of experience advising on Wills and will be able to assist you in ensuring that your wishes are reflected in your document. If you would like to arrange an appointment please telephone us on 01420 550543 or email us on firstname.lastname@example.org for further information.