Trusts date back to the early 13th Century during the period of Crusades. Knights going off to fulfil their duties would ask a friend or neighbour to look after their property until they returned. Over the centuries, numerous Acts of Parliament have been drafted to make Trusts a safe and secure way to hold your assets. Today Trusts enjoy a special status in the Law and are a part of everyday life. Many charities, schools and hospitals are a Trust. Your pension is a Trust.
Trusts are considered the gold standard of Estate Planning. They are incredibly useful and flexible and can help to protect your assets, bypass Probate, mitigate generational inheritance tax, stipulate when the beneficiaries may receive the asset and simplify the distribution of your Estate after you have passed away.
Let’s have a brief look at the two most common Trusts used in Estate Planning:
A Living Trust, also known as a Lifetime Trust, involves the settlor (the person establishing the Trust), the Trustees (the persons who will look after and manage the assets in Trust) and the beneficiaries (who will benefit from the assets held in Trust). Assets placed within them are protected or ‘insulated’ from life’s unfortunate events such as:
A Living Trust, also known as a Lifetime Trust, involves the settlor (the person establishing the Trust), the Trustees (the persons who will look after and manage the assets in Trust) and the beneficiaries (who will benefit from the assets held in Trust). Assets placed within them are protected or ‘insulated’ from life’s unfortunate events such as:
Furthermore, if you have children from a previous relationship, then it is a sure fire way of ensuring they receive their inheritance. You can stipulate when the beneficiaries receive the assets and retain full control of assets within the Trust while you are alive and have capacity. You are free to move home and change the beneficiaries or Trustees. The Trust can also help keep the asset within your bloodline, what we call Bloodline Planning, thus avoiding sideways dis-inheritance.
Furthermore, if you have children from a previous relationship, then it is a sure fire way of ensuring they receive their inheritance. You can stipulate when the beneficiaries receive the assets and retain full control of assets within the Trust while you are alive and have capacity. You are free to move home and change the beneficiaries or Trustees. The Trust can also help keep the asset within your bloodline, what we call Bloodline Planning, thus avoiding sideways dis-inheritance.
By placing your home into a Living Trust, your beneficiaries do not have to wait for the Grant of Probate. Some properties that become part of the Probate process end up being sold as distressed assets, usually fetching 20-30% lower than the market value.
A Living Trust not only gives protection but also saves your family money. The asset can be sold immediately upon second passing away thus avoiding a distressed sale scenario.
A Will Trust, such as a Property Protection Trust (PPT) is a Trust that is written into a Will. It gives guidance to your executors who must create the Trust upon your passing away. The cost of creating the Trust is paid from your Estate. This may be useful if you wish to create a Trust for either a child or vulnerable person.
it is important to note that a Will Trust does not protect your assets from life’s unfortunate events such as divorce, bankruptcy, generational inheritance tax, sideways disinheritance, bypassing Probate and so on.
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We often get asked about the various types of Trusts available and, most importantly, which one will be best suited to your circumstances.
Trusts are one of the most proposed ways to manage your assets and secure your Estate while remaining in complete control.
Each Trust type is structured and operates differently, and it’s essential that you take time to understand these differences and work with a professional team to support you and protect your assets.
Also known as Lifetime Trusts, a Living Trust is a strategic legal arrangement that aims to safeguard your most valuable assets.
Providing long-term security and flexibility, Living Trusts play a big role in Estate Planning as you (the settlor) can transfer ownership of your assets to a Trust in which named Trustees then manage these assets and act on behalf of named beneficiaries after your passing away.
This type of Trust operates during the settlor’s lifetime, meaning the settlor continues to benefit from the assets while planning for the future.
Safeguard your most valuable assets with legally binding arrangements.
Ensure assets are passed to the right people at the right time.
Continue to benefit from assets while planning for the future.
Places assets into a Trust while you’re alive in order to secure them for your beneficiaries. A family Trust protects against inheritance tax, and even future risks such as divorce or bankruptcy.
Trustees are given the power to decide how to distribute the Trust’s assets among named beneficiaries. This is a suitable lifetime Trust when looking for a high degree of flexibility, and if there are vulnerable beneficiaries involved.
Ensuring any surviving partners are cared for, this Trust type allows named beneficiaries the right to income or use of assets for their lifetime. Most suitable for blended families.
Thinking about a Lifetime Trust? Speak to the experts at Phoenix Estate Planning.
Whether you choose a Living Trust or a Will Trust, it is a big decision, and it’s vital that you understand the differences between the two so you can make the most informed decision for your circumstances.
A Will Trust allows you to appoint Trustees to manage and distribute your assets, finances, and investments, etc., upon your passing.
In comparison, a Living Trust UK allows you to place assets into Trust, which are managed during your lifetime and distributed by Trustees after you pass.
Living Trusts can be a valuable way to protect your assets from divorce, bankruptcy, and even family disputes.
Living Trusts don’t require a period of time waiting for a Grant of Probate for the assets to be sold, so bypass probate delays as Trustees are able to act immediately upon the settlor’s passing, whereas Will Trusts can face delays of 6 to 9 months in probate.
However, Living Trusts are more expensive in their initial setup costs, but they will offer more value over their lifetime. Providing you with a high degree of flexibility and control, Living Trusts also adhere to stricter privacy regulations, in comparison to Wills, which are made public after probate has been granted.
| Feature | Living Trust | Will Trust |
|---|---|---|
| When it takes effect | During your lifetime | After passing |
| Planning for incapacity | ✓ | ✕ |
| Reduce probate delays | ✓ | ✕ |
| Privacy | Private throughout | Public after probate |
| Flexibility & control | High | Limited |
| Initial setup cost | Higher | Lower |
| Long-term value | Higher | Standard |
Trusts are suitable for those who wish to protect their assets while remaining in control and requiring a high level of flexibility.
In particular, Trusts are suitable for:
Those looking for additional help with Estate Planning, as assets can be outlined and distributed according to precise wishes.
Book a free consultation with our team today.
Trusts are kept private throughout their lifetime, whereas Will Trusts become public once a Grant of Probate has been issued.
Living Trusts can help support and protect minors and vulnerable family members, as Trustees remain in control of assets and distribution.
Supporting inheritance tax efficiency and protecting assets. Any asset within the Trust is protected from life’s unfortunate events.
A Living Trust takes place during the lifetime of the settlor, who benefits from the assets during their lifetime, with these assets distributed to beneficiaries after their passing. In comparison, a Will Trust only comes into effect after passing away.
Yes, you are able to make amendments to your Living Trust if your situation or circumstances change.
Get in touch with one of our friendly team who would be happy to help you get started.
Yes. Assets held in a Lifetime Trust normally pass directly to your chosen beneficiaries without waiting for a Grant of Probate, which can significantly shorten the process and reduce delays.
For example, where a home is placed into the Trust, it still forms part of the overall estate for inheritance purposes, but Trustees can usually deal with it once a death certificate is issued (typically within around 10 days), rather than waiting months for probate to be granted. and delays.
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