Will Trusts

Life interest will trust on first death (IPDI)

The starting point is a couple — married, civil partners or unmarried — who own their home together and have children or other intended beneficiaries.

The trust is set up by including the right wording in each spouse’s will and, separately, by severing the joint tenancy so the home is held as tenants in common (typically in equal shares, but it can be any agreed split). Until the first death, the home is owned and lived in exactly as before — severance does not change occupation or day-to-day ownership.

On the first death, that spouse’s share of the home passes into the trust set up by their will. The surviving spouse has the right to occupy the home for the rest of their life, and to move and downsize while keeping the same right of occupation in the new property. When the surviving spouse later dies, the trust ends and the underlying capital — the deceased’s original share — passes to the children or other beneficiaries named in the deceased’s will.

Why the means-test treatment works

For care-fee means-test purposes, a life interest is not capital that the survivor owns. The survivor never inherited the deceased’s share outright; they only ever had a right of occupation. If the survivor later moves into care, the local authority’s financial assessment looks at the survivor’s own share of the property, not the deceased’s. This is settled and uncontroversial — and importantly, it is not deliberate deprivation by either spouse, because the deceased cannot deprive themselves of the cost of care they will never need, and the survivor never owned the share to begin with.

Inheritance tax treatment

On the first death, the spouse exemption applies to the gift between spouses, so the trust receives the deceased’s share without an immediate IHT charge. Because the trust is an Immediate Post-Death Interest within the meaning of section 49A of the Inheritance Tax Act 1984, the trust property is treated as part of the surviving spouse’s estate on the second death — meaning the deceased’s residence nil-rate band can usually be claimed in the normal way, the trust is not subject to the discretionary-trust ten-year periodic charges, and the survivor’s nil-rate band (plus any transferred nil-rate band) is available to set against the combined estate.

Other will trusts we use

A “will trust” is a category, not a single product. Where the right answer is not a life interest IPDI, we also draft:

• Discretionary will trusts — where flexibility across a class of beneficiaries is the priority and the trustees should decide who receives what and when.
• Bereaved minor’s trusts (s.71A IHTA 1984) and 18-to-25 trusts (s.71D IHTA 1984) — where the beneficiary is a child of the deceased and outright entitlement should vest at 18 or up to 25.
• Disabled person’s and other vulnerable beneficiary trusts — where a beneficiary needs continuing protection across their life, including their entitlement to means-tested benefits.
• Will trusts holding business interests, life policies or shares — where the asset itself drives the structure.

Lifetime trusts — when planning needs to take effect now, not on death

A will trust only takes effect on death. If you want a structure that takes effect during your lifetime — typically because you want specific assets to pass to your family without going through probate, or because you have a particular non-care reason for putting them into trust now — that is a different category called a lifetime trust.

We use lifetime trusts narrowly, and only for clearly defined non-care purposes. The two we most often consider with clients are:

• A Probate Trust — a lifetime trust whose purpose is to keep specific assets out of the probate process when you die, so they pass to your family without the delay and cost of a grant of probate. By design it is a gift with reservation of benefit for inheritance tax — the assets remain inside your estate for IHT on death — and it is not designed to reduce IHT. We use it only where the probate-avoidance saving is meaningful and you understand and accept the IHT position.
• A lifetime discretionary trust — typically for vulnerable beneficiary planning, business succession, or other specific non-care purposes, with the relevant-property IHT regime (10-year periodic charges and exit charges) fully disclosed before you proceed.

We do not use a lifetime trust as a way to avoid foreseeable care fees. Where care is reasonably foreseeable, settling assets into a lifetime trust is deliberate deprivation under the Care Act 2014 (England) or the Social Services and Well-being (Wales) Act 2014, and the trust is likely to be set aside. Our Care Home Fees page explains the deliberate-deprivation rules in more detail.

If you are not sure whether your circumstances point to a will trust on death, a lifetime trust now, or a combination of both, that’s exactly the conversation we have at the initial review.

What a will trust will not do

It is worth being explicit, because there is a great deal of misleading marketing material in this market.

• A will trust takes effect on death; it is not a way to avoid means-tested care fees during your own lifetime.
• A will trust does not shield assets from creditors of the deceased; the estate’s debts are still settled before any trust gift takes effect.
• A will trust does not override an Inheritance (Provision for Family and Dependants) Act 1975 claim by a spouse, civil partner, child or dependant — the court can still order provision out of the estate.
• A life interest will trust does not materially reduce inheritance tax on the second death (by design — the trust property forms part of the surviving spouse’s estate); for IHT planning we use different structures and will explain those separately.

If a will trust is being marketed to you as a single solution to all of the above, our advice is that it has been mis-sold.

Service levels and pricing

We offer a clear, fixed-fee will trust service with three levels of support, depending on the complexity of your arrangements and the reassurance you want through the process. Prices start from £895 for singles and £1,295 for couples.

Basic

For straightforward will trust arrangements where wishes are clear and a lighter level of professional support is appropriate.

Standard

Suitable for most will trust arrangements. Includes in-person guidance, multiple draft revisions, supervised signing, and professional checks to ensure the trust is set up correctly.

Premium

For more complex estates, or where you want priority handling and enhanced ongoing support. Includes senior adviser involvement, priority progression, additional draft revisions, and ongoing support.

You can read more about what is included at each level on the Service Levels page. Full pricing is on the Prices page.

We are members of the Institute of Professional Willwriters and follow its Code of Practice. We are not paid by commission.

Talk to us

If you would like to think through whether a will trust — and which kind — fits 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.