Heritage Wills and Probate

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A trust is simply the way in which property can be held for the benefit of others. For example, the earliest age that anybody can inherit from a will is at 18, so any gift in a will to a minor must be held by trustees on trust until the child reaches 18. The will could stipulate that the gift must be held until the child is older - perhaps 21 or 25. The trustees can also be given specific powers and discretions to provide flexibility. For example, they could be given power to provide income or capital early in the right circumstances. Trusts can be incorporated in a will for a variety of other reasons to safeguard assets.

Protective Property Trust

A Protective Property Trust allows an owner or co-owner to safeguard their share of the house for their children or other relatives in the event of their surviving spouse remarrying, having further children or requiring long term care. To prevent the surviving spouse being forced to sell the house, the gift to the children can be delayed until the surviving spouse has died. For further information see Protecting your assets.

Life Interest Trust

A Life Interest Trust is similar to the Protective Property Trust, in that property can pass to an individual for them to benefit from for the rest of their life, and then upon their death, for the capital to pass to someone else.

For example, Bob would like his sister to receive the income from his investments, but be guaranteed that the capital will pass to his niece and nephew when she dies. By giving her a life interest in his investments his sister would not be the legal owner of the property so couldn’t sell or give his investments away to anybody else.

Flexible Life Interest Trust

A Flexible Life Interest Trust is a combination of a Protective Property Trust and a Life Interest Trust and is designed to ensure that property and other assets are safeguarded for one’s own children. The trustees can be given wide flexibility to loan or advance capital to the surviving spouse. For estates that exceed £650,000 the trustees can also make potentially tax exempt gifts to other beneficiaries in the aim of minimising inheritance tax.

Discretionary Trust

A discretionary trust is useful for someone who may be unable to determine in advance the precise extent of each beneficiary's entitlement. In such a case, he may nominate a category of beneficiaries and give his trustees the power to determine how much (if anything), each beneficiary should receive, and when.

For example, an individual may have young children or grandchildren, and does not know how they will develop and what their differing needs will be. He may instead have older children, and may worry that one or more are showing signs of becoming wayward or irresponsible and may squander their inheritance. He may have a child in a shaky marriage or a risky business venture that he fears will end in bankruptcy.

Whatever his motives, a discretionary trust provides maximum flexibility to his trustees to take into account the particular circumstances of his beneficiaries at the appropriate time.

Disabled Beneficiary Trust

In leaving a gift to a disabled beneficiary, problems may arise which outweigh the benefits, i.e. 1) the assets of the beneficiary could be increased to a level which affect the eligibility of receiving means tested benefits; and 2) if the beneficiary has learning difficulties the Office of the Public Guardian could apply to have an Official Receiver appointed for the beneficiary in order to administer the gift on their behalf, which would incur charges.

Alternatively, if no provision is made for a disabled dependant, then the Office of the Public Guardian could contest the will to obtain a share of the estate on behalf of that dependant. In view of the above, it may be better to leave a gift to a trust so that the trustees can make periodic payments to the disabled beneficiary. This will ensure that state benefits remain unaffected and avoid the other problems.

Nil Rate Band Discretionary Trust

Unlike married couples, unmarried couples do not have a transferable inheritance tax allowance, and so a combined estate worth £650,000 would potentially attract £130,000 inheritance tax (IHT). By inserting these trusts in each of their wills allows the couple to make full use of their tax thresholds and save up to £130,000 in IHT.

Business Assets Discretionary Trust

Business owners can claim some valuable exemptions from inheritance tax, but if a beneficiary later sells their share of the business, the cash proceeds would potentially be subject to IHT at 40% when they die. By incorporating a Business Assets Discretionary Trust in a will, the trustees can ‘lend’ the business assets to a spouse or other beneficiary so that the valuable tax relief is maintained.





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