The Difference Between A Will And A Trust

A Will is a legal document that sets out how you want your estate to be distributed after your death. A Trust is a way of controlling your assets for your chosen beneficiaries, either during your lifetime or after your death.

Wills vs Trusts

A Will is a legal document that speaks from the point at which you pass away. It cannot be implemented whilst you are alive.

A Trust can be created either in a Will or during your lifetime. If it is in a Will, it will only become operative at the time the administration of the estate is complete. If it is in a lifetime document, it can take effect immediately.

Both a Will and a Trust are a statement by you as to how monies are to be applied. However, a Will is about the distribution of assets after your death, whereas a Trust is about the control of your assets and money. More specifically, control is handed over to a Trustee, who manages the asset on behalf of your beneficiary.

Wills and Trusts have very different implications from a practical point of view. If a gift in a Will is made ‘absolutely’, that word is telling the reader that the gift is not under the control of anybody other than the recipient. He or she is free to do with it what they will, such as sell the asset or destroy it. But if the gift says that the asset is to be held in trust, such as a house that is in trust for a partner, that partner has no freedom to destroy or sell the house.

Trusts for children

Parents tend to be quite keen on Trusts where they feel that their children are not responsible. This may be because the child (which can be an adult child) has a drug addiction or some physical or mental impairment. Children on the whole are not so keen on Trusts as it limits their financial freedom. Many children look forward to the inheritance they may receive from their parents to enable them to pay off a mortgage or buy a car, for example. Their intention may not be to protect that asset so it can be passed on to their own children.

Trusts to protect against care home fees

There are also other occasions where a Trust within a Will would be recommended, such as for a couples who are concerned about the impact of care home fees on their estate. With care costs running potentially at over £1,000 per week per person, it is very easy to see how the money within the estate can quickly dwindle, meaning it never reaches their beneficiaries.

In such a scenario, a Will could provide for half the house to pass to the children on the death of the first of the parent, with the other half passing to the surviving spouse, civil partner or partner. When that spouse, civil partner or partner goes into care, they will be taking with them only one half of the value of the house, as the other half has already passed to the children and cannot be swallowed up in care fees. This is a popular and legitimate type of Trust that is frequently encountered.

Get expert legal advice

We strongly recommend seeking legal advice as to the effect of Trusts. Different types of Trusts have different tax consequences.

The wording of a Trust can also be problematic, if you do not have a professional input. It is not hard to read a Will and fail to see that a particular type of Trust, be it a life interest Trust or a discretionary Trust, has been created. This mishap may only come to light on the death of the second person within a marriage, civil partnership or relationship. At that point, it becomes necessary to ascertain what assets should be administered within the Will of the second person to die. This may lead to a situation where the beneficiaries find that the assets are not there or should not be there, because they went into a Trust in the Will of the first person to die.

We cannot recommend highly enough that all Wills and Trust documents are inspected by a solicitor to prevent any such mishaps from occurring. Indeed, lifetime Trusts are considered to be so complex that it is a criminal offence under the Legal Services Act 2007 for a person who is not licensed under the authority of an approved regulator to draft a Trust document. Anybody can use the word “law” and “legal” and can be paid for writing a Will, whatever their knowledge and experience. Only a qualified solicitor with a practicing certificate can use the word “solicitor”.

Speak to our Wills solicitors

If you would like to make a Will or discuss the creation of a Trust, our solicitors can help.

Contact us today to book a consultation with one of our experts.