Creating a Will trust

By Tolley

The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Creating a Will trust
  • Trusts created by a Will
  • Wills for married couples - use of Will trusts
  • Discretionary Will trusts

Trusts created by a Will

A Will trust is created by writing the terms of the trust into a Will. There are many types of trust that can be created by a Will. It is important to be aware of the tax effect of the various provisions a testator may specify.

Relevant property trust

Will trusts of a discretionary nature will be subject to the relevant property regime. Any wording in the terms which gives the trustees discretion over the payment of income, or the power to accumulate income will create a relevant property trust with the potential tax consequences of principal and exit charges throughout its life. See the Relevant property and following guidance notes.

The following three forms of trust established under a Will are not subject to the relevant property regime:

Immediate post death interest (IPDI) trust

These are interest in possession trusts, typically conferring a life interest, but the iip could end on another occasion such as re-marriage. The interest of the beneficiary must commence on the death of the testator, although there is no objection if the life tenant’s interest commences after a survivorship period, eg 30 days. See the Qualifying interest in possession guidance note.

Bereaved minor trusts

These trusts can only benefit a child of the testator under the age of 18. The child must have the right to receive the capital at age 18. Note the bereaved minor cannot be a grandchild of the testator, but can include stepchildren if at least one of the parents has died.

IHTA 1984, s 71A

See the Trusts for bereaved minors guidance note.

Age 18-25 trusts

These trusts must be set up under the Will of a parent. The trust must provide that both capital and

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