Everyone should have an estate plan even if he or she isn’t filthy rich. Make sure that your belongings go to the people you choose by having an organised plan. But which type of plan is better, a will or a trust? Here are three benefits to having a trust versus a will.
Trusts Reduce the Amount of Inheritance Taxes
This benefit mainly applies to married couples. A will trust becomes active upon your death. The property is “split” into trusts that come together when the first spouse dies. This reduces the amount of inheritance tax on the property.
This type of trust would also work to protect any children from this marriage. If the remaining partner should remarry and then die without a new will, the property would revert to the new spouse. A will trust would ensure that your children inherited the property instead.
A Trust Can Reduce Care Home Fees
If you and your spouse have split your home in a will trust, this can save you on home care later on. When your spouse dies, you still have the right to reside in the home. When it comes time for in-home care, the half that the trust owns is not counted against you. The local authority can only assess your half of the home.
Trusts Give You More Control of Your Assets
When you create a trust, you will designate a “trustee”. This person is in charge of overseeing your wishes laid out in the trust. This is very useful if you die leaving behind minor children. Your trust will outline instructions for their care for the trustee to follow.
This also protects adults with disabilities. If you leave an inheritance to an incapacitated loved one, a trust allows for his or her care without causing him or her to lose any benefits that he or she may need. Set up your trust through solicitors dealing with wills to make sure that you protect your loved ones.
You can designate your solicitors as your trustees or just the advisors to the trustee. They will guide you through the process of writing a trust that meets your needs and your beneficiaries too. Ask them if a discretionary trust is the right option for you.
Will Trust or Lifetime Trust
A will trust is enforceable upon your death. Once you create a lifetime, or asset protection, trust, it immediately becomes active. With the second one, you gift your house and assets to the trust while still living in your home. Set up the trust so that it pays the bills and provides for your daily expenditures.
Lifetime trusts do come with some tax issues so be aware of those. You will need to pay inheritance tax if your home is worth more than the current nil-rate band. The trustee may also be responsible for paying this tax every 10 years and will need to submit tax accounts to HMRC.