Why you need to pay attention to Trusts

by | Sep 29, 2023

It’s increasingly common to find a Trust in a will, but most people don’t understand what they are or how to deal with them. Property trusts, in particular, are really common, and they must be dealt with properly, or it can cause a lot of problems. Here are some things that can go wrong with Trusts and how to avoid them.

What is a Trust?

You can use a Trust in your will for lots of different reasons. It can protect your home from care fees, allow you to leave money for children under 18 or to look after a relative who can’t care for themselves.

When you create a Trust in your will, it takes effect when you die, and your executors and Trustees have a duty to follow your wishes. They must understand the rules as it can cause problems if they get them wrong.

Case study: a change in the law

We sorted a will for a chap whose original will had been written years ago. His wife had passed away about 18 months before. Their wills included an old-style trust that mimicked the effect of the residence nil rate band, which didn’t exist at the time.

By the time his wife died, the trust wasn’t needed. They didn’t have to use it, but we completed the paperwork to make sure everything was in order. You can do this by getting the consent from all the beneficiaries.

Protecting the house from care costs

You can use a trust to protect your home from care home fees (more on that here). However, you need to make sure you complete all the right procedures. Using a Trust in this way also changes how you own the property, so you need to update the Land Registry. Otherwise, it can cause chaos if you want to sell the house later, as the documents relating to legal ownership won’t match. Trusts also need to be registered with HMRC if it runs for more than 2 years from the date of death.

What can happen if you ignore Trust rules?

Trustees have a legal duty to make sure a Trust is dealt with properly. You can run into problems if you don’t follow the rules, either because the Trust isn’t needed or you didn’t realise there was one.

You don’t have to use a trust if it isn’t needed, as long as you follow the proper process to vary the will. However, if the Trust is needed and has run for more than two years, you must register it with HMRC. The rules have changed recently, so they’re being nice, but they will catch up with you eventually and can give you a fine.

Ignoring a Trust can mean an asset ends up with the wrong person. Trustees can be personally liable for any losses, and you could find yourself being sued by the bereaved family. That’s not going to be a pleasant experience for anyone. The police could also investigate to see if you’ve committed fraud.

Get professional advice

If you’re an executor or trustee, you must understand your legal obligations. If you look at the will and don’t understand what you’re reading or your duties, speak to someone and get proper advice. Most solicitors and will writers offer a half-hour chat for free. That could be enough to help you understand what you need to do, but it also means you can get further support if you need it.

If you’re ready to make your will or need to understand your duties as a trustee, we can help. Get in touch using the form below or call us on 0116 380 0752.

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