Will Trusts v Lifetime Trusts – What’s the difference?

Will Trusts versus Lifetime Trusts – what is the difference? In a nutshell, Will Trusts take effect when you die, whereas Lifetime Trusts are available immediately.

So, why would you want a Lifetime Trust?

Lifetime Trusts allow you to transfer ownership of your assets while you are still alive. This protects assets whilst enabling you to still enjoy them, or to be able to pass them on to your beneficiaries in a tax efficient way.

This is an opportunity for you to enjoy sharing your assets with your loved ones, whilst you are still alive. You can also be a Trustee, so you can manage how your beneficiaries access assets. If there is money in the Trust, you can still decide how it will be invested, and under what circumstances you will release money to loved ones.

If you have a loved one who is vulnerable or has a disability, a Lifetime Trust can be a very effective way of you protecting them, and ensuring they are set up for any future needs.

Assets placed in a Lifetime Trust do not form part of your estate, and thus your Executors do not need to obtain a Grant of Probate to access those assets. Property is one of the most common assets to be put in Trust. It also means the property can be sold without probate being granted after your death – releasing potentially essential monies to your beneficiaries.

Often, when someone dies, their estate is passed on to their spouse. If they inherit the entirety, it becomes theirs to do with as they wish. If they then remarry there is a risk that the inheritance will be passed on to that new spouse and their family. Lifetime Trusts are an excellent way of you protecting your estate to ensure it is available for your family and beneficiaries, not those of potential strangers.

Lifetime Trusts can also be a way of protecting assets, particularly property, should you need to go into care. However, these need to be set up professionally, and you need to understand all of the implications before doing this. Accessing care provided by the Local Authority rather than privately funded may not provide you with the quality and level of accommodation and standard of living you would choose.

Crucially, if you choose to put your property into a Lifetime Trust you should ensure you are paying rent to live in the home directly to the Trust.

All Trusts now need to be registered with HMRC. The Trust is reviewed on a regular basis by HMRC and may be subject to tax if it exceeds the nil rate band. It is advisable to seek professional advice from a trained professional tax advisor before incurring the cost of setting up your Trust.

Trusts can be very effective.

But they need to be set up by a professional. You also need to understand all of the implications – for you, your beneficiaries and your estate. We advise you to consider all of the costs before going ahead.

If you would like help setting up a Lifetime or Will Trust please contact us on 01344 875 310.

Will Trusts v Lifetime Trusts