The terms “trust” and “Will” are often thrown around together when the topic of Estate Planning arises. Our Estate Planning solicitors are frequently asked about the difference between the two, and whether a testamentary trust Will is preferable to a simple Will. There are a range of options that can be tailored for every individual’s specific Estate Planning needs, however we break down the key differences below.
What is a Will?
A Will is a formal legal document directing how your estate should be managed upon your death. It specifies who should be responsible for carrying out your estate administration, who your assets should be distributed to upon your death, and other important things like who will be the guardian of your children.
What is a trust?
A trust is a form of legal relationship. It allows you to assign someone else to manage your property and assets on behalf of either yourself, or other people. The person you assign to manage assets or property is called the ‘Trustee’, and the people who will receive the benefit of the assets or property are called the ‘beneficiaries’. You can create a trust to manage property while you are still alive and you can also create a trust to come into effect upon your death in your Will, called a ‘testamentary trust’.
Should I make a testamentary trust?
When a beneficiary is left assets or property under a simple Will, they are usually gifted the entirety of what they are to inherit in one go. This can be a significant amount of money or very expensive assets.
On the other hand, testamentary trusts provide a way for assets, such as money in the bank, to be distributed to a beneficiary in smaller amounts and/or over a longer time frame. This can be very useful if a beneficiary has a particular disability, illness, addiction or other circumstance which could result in the wastage or loss of an inheritance if it were given in one go.
Testamentary trusts are also a good avenue for tax reduction for a beneficiary who is set to receive income derived from the assets that form a part of their inheritance.
Wills containing a testamentary trust do create a layer of complexity and an ongoing duty for the person you appoint to administer your estate comparative to a simple Will. Whether a Will containing a testamentary trust would be beneficial to you and preferable to a simple Will will depend on your individual circumstances.