Given the events of recent months, there should be no need for a reminder that nothing is certain, nor can we predict what's around the corner. The majority of people understand the importance of having a Will, but Wills should be kept up to date to ensure that they 'keep pace' with changing wishes, financial and family circumstances. The consequences of not doing so can in some cases be as disastrous as having no Will at all.
Sometimes, a simple Will just isn't enough. Whether your priority is asset protection after you are gone, or passing assets along in a tax efficient manner, you should consider including appropriate trusts in your Will. Some examples include:
- A nil rate band trust. If you are married or in a civil partnership, a nil rate band trust ring-fences £325,000 from the possible bankruptcy, remarriage or care costs of your surviving spouse or partner.
- Life interest trust. If you are in a second relationship, you may be torn between providing for your new spouse or partner and ensuring your children inherit your estate. This type of trust works to provide your spouse or partner with security, whilst ensuring that the assets eventually pass to your children.
- Discretionary trust. If any of your family members are vulnerable or you're concerned about your children's relationships, this trust provides the people looking after your estate with the discretion on how and when to distribute assets. Children can also use the flexibility offered by this type of trust for their own estate planning – often by the time they inherit, they will be facing inheritance tax conundrums of their own, which this trust can help with.
All of these trusts can offer asset protection and potential inheritance tax savings, in the right circumstances, but usually the key to their effectiveness will be choosing the right trustees. Although it is often right for children to be named amongst the trustees, this can sometimes result in a future conflict of interests and should be well thought out.
A letter of wishes should accompany these trusts, to explain what was on your mind when setting them up and to also guide the trustees on how best to use their powers.
With the right trustees and a carefully worded letter of wishes, trusts are a very flexible tool to ensure the to ensure the desired outcome whatever the circumstances.
You should review your Will without delay to make sure it is up to date. If you don't have a copy, ask your solicitor for one. If you can't find your Will or don't remember whether you have made one, don't panic – if you prepare a new, properly worded Will, anything prepared in the past will be revoked.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.