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IPDI vs FLIT

By | Trusts | No Comments

Complex families often come with complex requirements to meet their long-term goals, and matters can be made more difficult when each testator has separate goals or concerns in mind. These goals usually revolve around the inheritance the children are to ultimately receive and when they receive it, and it certain cases, if they inherit at all. Using a Life Interest of the Residuary Estate can cater for most family needs for a number of reasons; On first death, the surviving spouse will be the Life Tenant. They will be entitled to all income generated by the trust and the trust can allow them access to the use of capital at the Trustees’ discretion if desired; All Life Interest Trusts allow the use of the Transferrable Nil-Rate Band (TNRB) between spouses; Each testator can appoint separate beneficiaries from each other; If the Trustees are given the power to advance capital, it…

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Disabled Person’s Trust

Disabled Person’s Trust

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A Disabled Discretionary Trust (also known as a Disabled Person’s Trust or a Vulnerable Person’s Trust) can be utilised where a child or other relative has a disability. There are essentially two reasons why a trust is considered advisable for disabled beneficiaries. If this person inherits from a Will directly, their entitlement to any means tested benefits could be affected. Alternatively, depending on the exact disability, the beneficiary disabled person may be unable to manage a large sum of money due. If that person also lacks mental capacity and does not have a Property and Affairs LPA, it is likely that an application would have to be made to the Court of Protection to appoint a Deputy. This is a lengthy and expensive process and incurs ongoing costs and should be avoided. A disabled person’s inheritance should therefore be placed into a Disabled Discretionary Trust. The disabled beneficiary is the…

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Setting up a Will-Based Trust After Death

By | Trusts, Wills | 2 Comments

It has been brought to our attention that there are some misconceptions in regards to what action needs to be taken for a Will-based trust after the death of the Testator. The following article is intended to clarify these points. A trust in a Will, such as a Protective Property Trust, Flexible Life Interest Trust or Discretionary Trust, is not automatically set up on the death of the client. The Will trust is not itself the trust, it is more of a direction that a trust of those terms is set up upon the client’s death. There are further actions which need to be taken by the executors upon the Testator’s death in order to set up the trust and clients should be made aware of these steps. A formal trust deed would need to be drawn up on death to create the trust. This will most likely refer to…

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Discretionary Trusts

By | Property, Trustees, Trusts | No Comments

The Discretionary Trust is a common Trust for a Testator to use for their children to ensure that they do not inherit directly from their estate. The reasons for this can vary, for example, protecting assets from potential divorce, drinking or gambling issues, or the testators may wish that their assets are distributed in a particular manner or at certain points in their children’s lives that are outside the capabilities of the Will itself. This type of trust is effective because the assets are held and managed by the Trustees to distribute to the beneficiaries at their own discretion, hence the name of the trust and just because a beneficiary is named under the trust does not mean that they are absolutely entitled to any assets – useful where the Trustees may have concerns over how the money may be used.  Where beneficiaries are named under the Trust; this can…

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WillPack

PPTs: Concerns with Mortgages and Equity Release

By | Trusts | One Comment

PPTs: Concerns with Mortgages and Equity Release PPTs and Mortgages Should clients wish to use Protective Property Trusts (PPTs) in their Wills with a property that is subject to a mortgage, they should be aware that a share of the property cannot enter a PPT on first death as technically until the mortgage has been settled the clients do not fully own the property. The most simple solution to this would be to ensure that both clients have life cover in place to cover the mortgage on first death. Alternatively, if the Residuary Estate would have enough assets to fully cover the mortgage on first death, the Executors could use the Residue to pay the outstanding mortgage off. If on death there is still a mortgage on the property and neither of these are possible, the survivor does still have limited options; They can sell and downsize if the PPT…

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General Discretionary Trust

By | Trustees, Trusts | No Comments

A General/Standard Discretionary Trust has a wide range of uses from protecting assets from the beneficiaries themselves, or third parties seeking money from the beneficiaries. As the assets are held by the Trust, it is out of direct reach of the beneficiaries and is not considered as part of their estate. However, for the Trust to work in this way, there must be more than one beneficiary of the Trust, otherwise the assets are deemed to be owned by that one beneficiary, making this level of protection ineffective. The General Discretionary Trust is useful for making provisions for a dependant, or any other person(s) who could claim under the Inheritance (Provisions for Family and Dependants) Act 1975, without them directly inheriting. This reduces the risk of a successful claim against the estate. This could, however, leave the Trustees in a difficult position of being pressured by this beneficiary. The Trust…

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The Number of Trustees

By | Trustees, Trusts | 2 Comments

When a Trust is included in a Will, clients will often wish for their surviving spouse to act as the sole Trustee. Whilst this is not an issue in most Trusts it can cause complications where the Trust includes land (such as a PPT). A sole Trustee is unable to give a valid receipt any capital money arising from land. This means that a sole Trustee of land is unable to deal with any income from a property or sell the property (for example if they wished to downsize under the terms of a PPT). The Trustee is able to appoint further Trustees themselves, however it should be noted that Testator does not get a say on who this Trustee is and it could indeed be someone who the Testator would not wish to act. This restriction does not apply to Trust Corporations; they are able to act solely without…

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Disabled/Vulnerable Person’s Discretionary Trusts

By | Guardianship, Inheritance, Legal, Trustees, Trusts, Wills | 2 Comments

The Disabled/Vulnerable Person’s Discretionary Trusts These are useful trusts to use when your client has a child or another relative with a disability and who needs constant support. If this person inherits from a Will directly, this may affect what disability benefits they may receive. We can put the assets into a Discretionary Trust with the disabled beneficiary as the Principal Beneficiary. As with any other Discretionary Trust, there must be more than 1 appointed beneficiary. The main reason for this is because whenever a person in receipt of disability benefits receives an inheritance, the Local Authority will want to assess them. This means if they hold over a certain threshold (this can vary) the Local Authority can cut the benefits that person receives. If the estate of the testator is due to pay any IHT. This will need paying before the assets are passed into the Trust, at 40%…

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