Trusts
A trust is a legal arrangement in which one or more trustees hold assets on behalf of one or more beneficiaries, under terms set out in a trust deed. Used correctly, a trust can solve a number of well-recognised problems in estate planning — provided the right trust is matched to the right need.
We use trusts where they are the right tool for the job. We do not market trusts as a generic “asset protection” wrapper, nor as a way to avoid foreseeable care fees, nor as a substitute for a properly drafted will. This page sets out the trusts we most commonly use.
When a trust is the right tool
Trusts genuinely help in a number of well-recognised circumstances:
- to ensure a share of the family home passes to your children rather than being absorbed into the survivor’s later remarriage or changed will (sideways disinheritance);
- to provide for a disabled or vulnerable beneficiary without jeopardising their entitlement to means-tested benefits;
- to protect inheritance for children who are minors, or who you want to inherit at a later age;
- to keep flexibility across a class of beneficiaries when their circumstances may change before distribution;
- to keep specific assets out of probate so they pass to your family without delay or grant-related expense;
- to hold a business interest, life policy or trust corporation appointment for the long term.
When a trust is the wrong tool
A trust is not a route to:
- avoid means-tested local authority care charges where care is reasonably foreseeable (deliberate deprivation under the Care Act 2014 and the Social Services and Well-being (Wales) Act 2014);
- shield assets from creditors where insolvency is in prospect (Insolvency Act 1986 sections 339, 340, 342 and 423);
- defeat a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (section 10 anti-avoidance);
- escape inheritance tax where the settlor retains the use or benefit of the asset (gift with reservation of benefit, section 102 Finance Act 1986).
If a trust is marketed to you as a single solution to all of the above, our view is that it is probably mis-sold.
The trusts we use
The structure that’s right for you depends on what problem you’re trying to solve. The most common ones are below.
OUR MOST RECOMMENDED
Will trusts — life interest on first death
A will trust takes effect on death under the terms of your will. The most common form for couples is the life interest will trust (an Immediate Post-Death Interest, in tax terminology). On the first spouse’s death, that spouse’s share of the family home passes into the trust. The surviving spouse has the right to occupy the home for life, and the underlying capital is held for the children or other beneficiaries.
It protects against sideways disinheritance: the deceased’s share is fixed for the children regardless of remarriage or any change to the survivor’s will. For means-test purposes, a life interest is not capital that the survivor owns — the survivor never inherited the deceased’s share outright — so on a later financial assessment only the survivor’s own share of the property is in the assessment. The spouse exemption applies to the original gift on first death, and the IPDI rules then treat the trust property as part of the surviving spouse’s estate for IHT.
This is the form of trust planning we most often recommend for couples who own their home together and have children or other intended beneficiaries.
FOR PROBATE AVOIDANCE ONLY
Probate Trust — a lifetime trust
A Probate Trust is a lifetime trust whose purpose is to keep specific assets out of the probate process when you die, so that they pass to your family without the delay and cost of obtaining a grant of probate.
A Probate Trust is not designed to reduce inheritance tax. By design, the settlor retains access to, and control of, the trust assets, which means the trust is a gift with reservation of benefit for IHT — the assets remain inside your estate for IHT on death. We discuss this on the file with every client. If your priority is inheritance tax planning, we use different structures and will explain them separately.
A Probate Trust is suitable where you want your family to receive specific assets quickly after your death without waiting for probate; you accept that the assets remain in your estate for IHT; and the probate-avoidance saving is meaningful relative to the cost of the trust. It is not suitable where you have a reasonable expectation of needing care and support, where you are seeking to shield assets from creditors, or where you are looking to reduce inheritance tax.
Discretionary trusts
Where flexibility matters because beneficiaries’ circumstances may change before distribution; where you want to provide for someone without making the assets directly theirs; or where you want to keep options open across a wider class.
Subject to the relevant property regime — 10-year periodic charges and exit charges — which we model before recommending one.
Vulnerable beneficiary trusts
For a beneficiary with long-term disability, mental incapacity, or in long-term receipt of means-tested benefits. A disabled person’s trust under section 89 IHTA 1984 carries special tax treatment that avoids the discretionary-trust regime.
Drafted in coordination with deputies, attorneys and the wider professional team.
Trusts for children’s inheritance
Bare trusts (vesting at 18); bereaved minor’s trusts (s.71A IHTA 1984); and 18-to-25 trusts (s.71D IHTA 1984) for parents who want to delay outright entitlement past 18.
The right structure depends on the size of the gift, who is making it, and the age at which the child should take outright.
Trust Corporation
Clarke & Wright Trust Corporation Limited is appointed as trustee or executor where clients prefer not to burden a family member with the long administration of a trust, or where they want continuity of professional trusteeship across the life of a trust.
The role and the fees are set out in the engagement letter; we are not paid by commission.
How we approach trust planning
We start with the problem you’re trying to solve — sideways disinheritance, providing for a vulnerable beneficiary, probate delay, inheritance for minors, business succession — and only then choose the trust. We tell you, on the file, what the chosen trust will and will not do, including its tax and means-test consequences. We will not recommend a trust as a way to avoid foreseeable care fees, and we document the non-care reasons for any lifetime planning we recommend so the rationale is on the file if it is ever queried. For complex tax or trust positions we refer to a STEP-qualified solicitor.
We are members of the Institute of Professional Willwriters and follow its Code of Practice. Our pricing is fixed and is published on the Prices page.
Talk to us
If you would like to think through what, if anything, the right trust looks like for your circumstances, we offer a no-obligation initial conversation.
📞 01743 387210
✉ info@clarkewright.co.uk
Nothing on this page is legal or financial advice. Trust law and the related tax rules are detailed and the right structure depends on your individual circumstances. Personal advice should be sought before acting.