More and more people are choosing to leave their assets to a trust established in their Wills instead of directly to family members. Many individuals make this choice with the primary goal of safeguarding their assets for future generations, placing greater importance on asset protection rather than solely focusing on the implications of Inheritance Tax.
Blended families, where individuals have children from different relationships, are becoming increasingly common. In such cases, a simple Will that leaves assets directly to a surviving spouse and then to the children may not be the best option. For example, someone getting married for the second time may want to provide for their new spouse while simultaneously safeguarding the assets for their children from their previous marriage.
In this situation, a Life Interest Trust can be created, granting the surviving spouse the right to income or enjoyment of the assets during their lifetime, with the estate ultimately being safeguarded for the children upon the spouse’s death.
In certain circumstances, it might be suitable to safeguard assets of an estate in a Discretionary Trust overseen by dependable individuals. This can be beneficial in situations where there is a substantial wealth at stake or apprehensions about children receiving a sizable inheritance outright.
Regardless of if a Will includes a Life Interest Trust or a Discretionary Trust, the choice of trustees is crucial. Trustees have significant power when it comes to managing the trust, so it’s important to provide them with clear guidance through a Letter of Wishes.
Although this letter is not legally binding, it helps ensure that your chosen trustees understand your priorities and how you want them to exercise their authority. Overall, the most important factor is choosing trustees that you have complete trust in, knowing that they will faithfully carry out your desires.
It’s important to select trustees with whom you have a strong relationship and who will carry out your desires. They don’t necessarily need specific professional expertise or estate management skills. What matters most is that they take an active approach to the role and take professional advice if needed.
Close friends or relatives often make suitable trustees especially if they have a grasp of the family dynamics and relationships at play. However, in cases where there is conflict within the family, the estate is highly complicated or you lack trust in potential trustees, it may be wise to appoint a professional as an impartial third-party trustee.
Keep in mind that a trust created through a Will only becomes active after the person’s death. Until then, you can modify the Will and change the trustees as needed. Likewise, you have the flexibility to make updates to the Letter of Wishes with minimal procedural requirements without the need to modify the Will directly. Although the choices you make carry weight, they are not necessarily permanent and should be reviewed periodically.