When making your Will it may be difficult to think about how your family could expand in the future. Perhaps you would like to ensure that any inheritance continues to be passed down the generations and make provision for grandchildren or even great grandchildren some of which have not even been born yet. If so, creating a trust in your Will could be the solution for you.
One of the most difficult things when making your Will is trying to future proof your Will and thinking through how your family situation may change before you die. What might their needs be? Perhaps your children will be well established, and your grandchildren or even great grandchildren may benefit more from an inheritance at their stage in life. Perhaps rather than gift named beneficiaries specific shares of your estate as soon as you pass away you might prefer to allow some flexibility so that decisions can be made at the time of your death on who in the family would best benefit and how.
For these reasons, amongst others, many people choose to include discretionary trusts in their Wills and here is how they can help:
A discretionary trust allows you to name individual people or even groups of people as potential beneficiaries. For example, this could include your spouse, children, grandchildren, great grandchildren as well as other family members, friends or even charities. The advantage of naming groups like grandchildren and great grandchildren ensures that even if they have not been born when you make your Will they could still be included after your death.
The trust will also need to name trustees whose role will be to look after the funds and assets in trust and to distribute these as and when they see fit. Your trustees will have an important role and you should consider carefully who to appoint. It would be worth considering how your potential trustees would cope managing money, dealing with beneficiaries, and making important decisions. In some instances, you may wish to consider appointing a professional trustee to take on this role rather than appoint friends or family who may not be as experienced.
Having a discretionary trust in your Will means that there could be a large number of people or charities which could benefit from your estate after your death. This can be advantageous as your appointed trustees can make an informed decision, based on the circumstances at that time, on who from the pool of beneficiaries should benefit and in what proportions. They can also make the decision to hold onto the funds and assets in trust until certain beneficiaries are better placed to receive them. Perhaps the trustees would prefer to wait for beneficiaries to become a bit older and wiser, so they are more likely to make better choices when they receive their share.
To help your trustees with these decisions it is always recommended that you create a Letter of Wishes alongside your Will to provide your trustees with some guidance and let them know what you would like them to consider and what your wishes would be. Perhaps you would like them to put the needs of your surviving spouse first whilst they are still alive, maybe you would like them to take into account that you have helped one of your children financially already and would therefore like others to benefit in a greater proportion after your death. Perhaps your main priority would be to assist your grandchildren after you have died since your children are already comfortable. A Letter of Wishes will provide an invaluable document for your trustees and although the contents will not be legally binding (the nature of the discretionary trust is that decisions are made at the discretion of the trustees) it is rare that the trustees will not want to take these wishes into account.
As well as providing lots of benefits, discretionary trusts may also bring some complications and it is important that you obtain the right professional advice so that you can be comfortable you know how this could affect things like your inheritance tax allowances whilst taking into account your personal circumstances.
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