The Town & Country Law Family Probate Trust
What is a Trust?
A Trust is defined in the dictionary as “an arrangement whereby a person (a trustee) holds property as its nominal owners for the good of one or more beneficiaries”. On this basis a Trust is a very simple concept and can be explained better with an example.
John has £100,000.00 in a bank account and he wants to give it to his grandchildren. The problem is he does not want to just give it outright to them. He wants to ensure it is given to them in appropriate amounts at the right time. John trusts his children to do this, but does not want to burden his children with outright owning the £100,000.00. He also wants to make sure that the money does not go to his children, but rather his grandchildren.
John therefore transfers ownership of the money to his children on the basis they are holding it for the benefit of his grandchildren. This is essentially a trust.
In this scenario there are three different parties to the trust:
- The Settlor – John
- The Trustees – John’s children
- The Beneficiaries – John’s grandchildren
These parties will be present in all trusts, including the Trusts prepared for you by Town & Country Law.
In addition to these people you may have a Trust with a Life Tenant (a person with a life interest) and/or a Guardian (an additional person overseeing, or even having final say, on Trustee decisions).
We must stress that this is a very basic overview of a Trust. From this starting position there are a variety of categories to which trusts can fall into, each category comes with its own tax treatment and rules.
What is the difference between a Lifetime Trust and a Will Trust
A lifetime trust is established during your lifetime. The above example would be a lifetime trust. John, while alive, has transferred legal ownership of the money to his children, for the benefit of his grandchildren.
John could have made provision in his Will that his children were to hold this money for his grandchildren. This Trust would not be established until John died. This is a Will Trust. There are different reasons for choosing lifetime or will trusts.
What Lifetime Trusts do Town & Country Law offer?
Town & Country Law offer a Family Probate Trust. Our Family Probate Trust is established in your lifetime and falls into the category of an Interest in Possession Trust. The Trust will have a Settlor, Trustees and Beneficiaries as well as a Life Tenant.
The primary purpose of this trust is to speed up the process of inheritance to your beneficiaries, and to avoid unexpected things happening in that process.
Many of our clients have experienced difficulties in dealing with a loved ones probate. Time delays and high costs being two of their biggest issues. The Family Probate Trust can assist in this, as the Property placed in to the Trust will not have to go through probate on the Settlors death. Instead the Settlors death will trigger the Trustees to act and distribute the Trust Fund to the nominated beneficiaries in accordance with the Trust. This may mean transferring the property to the names of the beneficiaries, if the beneficiaries want this, or selling the property and distributing the sale proceeds.
This works because the Trustees have legal ownership of the property, therefore they are able to deal with it as their own, not as part of the Settlors estate. Therefore, they are able to sell the property, once the person with a life interest has died.
Are there any other benefits?
Yes, there can be. These include:
- No need for probate for any assets in the Trust. This could save your beneficiaries thousands of pounds in costs and the time periods associated with obtaining a grant of probate.
- The owner (Settlor) of the Trust always maintains control of their Trust in their lifetime.
- Beneficiaries inherit quickly.
- Prevents sideways disinheritance: Estates can be lost to children through unexpected second marriages of widows.
- Can help protect the Trust assets in the event of a divorce, bankruptcy or other unexpected events.
- Children inherit at the right time.
- Flexibility to move home or sell your property as you choose.
- Each Spouse grants the surviving Spouse a ‘Right to Reside’.
- Beneficiaries only inherit the Trust fund after all the Settlors of the Trust have deceased.
- There are absolutely no ongoing costs or charges for this Trust. Following the death of the Settlors (owners of the Trust) there are no additional costs to selling the property.
- Wills can be changed, even up to 2 years after death. Trusts cannot be changed in the same way; Trusts can be more difficult to challenge than Wills.
- If you lose capacity to deal with your own affairs, the trustees of your trust can manage your home and ensure proper provision is made for you.
- Some trusts can save your children from being pushed in to paying Inheritance Tax on their estates.
Who will be named as the owner of my property?
The Trustees of the Trust will be the legal owners of the property, and the beneficial owners are the beneficiaries or any person with a life interest.
Being a Trustee does not mean that the person owns the property as part of their estate. Therefore, being a Trustee should not cause any problems in relation to Stamp Duty or buying a first home.
Are there any other considerations?
Are there any other considerations? Yes. When making a lifetime gift of any kind, whether this be a transfer of property or assets to a trust or a large gift to a friend or family member you must always consider whether you may fall foul of the rules on Deliberate Deprivation of Assets. This could relate to the need for Long Term Residential Care in the future, if you are aware you may be made bankrupt and the asset would form part of your estate or if you are going through a divorce and a financial settlement is yet to be reached. In any of these scenarios it could be claimed that you have deliberately deprived your estate of an asset, whether this is to avoid creditors or paying care home fees, action may be taken against you or your trustees. We can of course provide advice on this.
Please see our guide to, amongst other things, deliberate deprivation here.
If you believe, reasonably, that establishing a Probate Trust would fall foul of these rules, then you may wish to consider planning your estate using a TCL PPT Will Trust instead. If you require further guidance on the legislation, please contact us.