Produced by Tolley in association with Emma Haley at Boodle Hatfield LLP
  • 19 Oct 2021 23:08

The following Trusts and Inheritance Tax guidance note Produced by Tolley in association with Emma Haley at Boodle Hatfield LLP provides comprehensive and up to date tax information covering:

  • Will trusts
  • Introduction
  • Typical circumstances where a Will trust may be found
  • Tax considerations
  • How a Will trust is created

Will trusts

Introduction

Trusts are not confined to lifetime arrangements. A trust can arise on death under the terms of a Will. It is much more common, in fact, for people to have a trust in their Will than make a trust in their lifetime.

A client making his Will (known as the ‘testator’ in the case of a man and ‘testatrix’ in the case of a woman) needs to think firstly about who his beneficiaries are to be. Next, the testator must choose between making outright gifts and leaving his property in trust.

Trusts are much more flexible than outright gifts. This flexibility can be especially useful in a Will given that it does not usually take effect straight away and might not come into effect for many years. The testator cannot anticipate precisely what his family and financial circumstances will be at the time of his death. Similarly, the future financial and personal position of the beneficiaries is uncertain at the time the Will is made.

A trust (in its most flexible form) can effectively leave the decision open as to the identity of the beneficiaries and / or timing of their benefits by giving trustees the powers of distribution after the testator’s death. A trust can also leave property to different beneficiaries in succession so that the testator retains control of the ultimate destination of his property even after his death.

There are different types of trust, each giving the beneficiaries a different sort of interest in the property, and the tax treatment varies in each case. The choice of trust will depend on the circumstances and will involve a careful balancing act between personal considerations and tax implications. The testator’s personal preferences and family situation should always take priority although the tax consequences of choosing one type of trust over another should be fully explained. The advisor’s role is to achieve the client’s objectives in the most tax-efficient way.

Typical circumstances where a Will trust may be

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