Assets in trust: lifetime beneficial interest and discretionary trust
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Document overview

This will template allows the testator to place his or her estate, after specific gifts, into two trusts: one that has a life beneficiary (such as a wife or a husband), and another that is a discretionary trust. It also includes provisions for gifting a share in a private company or business partnership. By doing this, the will allows beneficiaries to benefit from assets, without owning them. This may be desirable in situations of second marriages where the testator doesn't want to disinherit children from earlier relationships, or where there are young children, or where the testator wishes his estate to skip generations (perhaps to avoid being passed to the family of a second husband or wife of an adult child). As in other Net Lawman will templates, you can set trust provisions in detail, giving you control of how the trustees should invest and manage your estate. Also included with the template are guidance notes, explaining clearly how to edit the template and how to sign the will correctly, and a short example letter of intent to your executors or trustees.
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About this document

This will template has been drawn to provide the person making the will (the testator) with a high degree of control over his or her estate. The most likely user of this document is a person in a second marriage who does not want to disinherit his or her children from earlier relationships. This will could also be used to provide income for, or make assets available for use by life beneficiaries to whom gifting directly would be inappropriate, for example, to an adult dependent.

After making general bequests and legacies, including the possible gifting of a stake in a private company such as a family business or a share in a business partnership, the estate is placed into two trusts.

Into the first trust, assets for use by a life beneficiary, for example, income generating assets or the family property. After the death of the life beneficiary, this trust is distributed to named beneficiaries. You can read more about life interests.

The remainder of the estate is placed into a second (discretionary) trust for other beneficiaries. You have the flexibility to decide the powers that the trustees have, and when and how income and capital is distributed.

Use of a discretionary trust rather than a standard trust has a number of advantages:

  • entitlements can be rearranged within 2 years, allowing post death tax planning;

  • allocation does not have to be on an even basis - some beneficiaries could be given a greater share than others;

  • trustees have discretion (which you can guide in a letter of intent) as to how to use the estate. For example, you could direct that it should be used to help support children who want to go to university;

  • benefit can be maintained without giving ownership in situations where ownership could erode value. For example, your share of a family business could be left in a discretionary trust so that your children only become shareholders (controlling how the business is run) once they have sufficient experience.

Note that many of the tax benefits of discretionary trusts have now been removed. You can read more about types of trusts.

We also have an article on leaving an interest in a business.

Who should use this template?

The most likely user of this will template is a business owner who has remarried, but who has children from earlier relationships who he or she does not want to disinherit. The use of a discretionary trust makes this template suitable if some beneficiaries (such as young children or dependents) are not yet financially responsible.

Of course, there is provision to leave some of the estate to charity or to extended family or friends.

As an example, using this template, the testator could:

  • leave his share of the family business to his brother (and business partner);

  • leave his collection of worthless antique maps to his friend;

  • place his share of the marital home and furniture, plus investment assets that should generate an income of at least £20,000 a year into a trust for his wife during her lifetime, and then to his children when she dies;

  • all other assets into a discretionary trust for the benefit of his young children from his first marriage.

This template is suitable for a man or for a woman - it isn't gender specific. We follow normal, modern legal convention of using the masculine form of a word regardless of the gender of the person.

If the value of your estate could exceed the nil rate band, then we suggest that you seek advice from a qualified tax specialist before signing your will. The NRB is currently £325,000. If you leave your home to a direct descendant such as a child or grandchild, then it increases by £175,000 to a maximum of £500,000.

The law in this will

The law on wills is varied but precise. This will provides flexibility within that precise legal framework. The Net Lawman trust powers in this document free the trustees from some of the bonds of the Trustee Act 2001 that are unsuitable for trusts managed within your family and by professional advisers.

Note that in England and Wales, the law governs how jointly owned property (such as your home) can be passed on after your death. Unless you and you co-owner have entered into a tenancy in common agreement, your co-owner is likely to inherit your jointly owned property, regardless of your will. The main implications are:

  • that the inherited share of property may increase the value of the co-owner's estate beyond the nil rate band, so that on the death of the co-owner, more inheritance tax is paid than would have been if the co-owner did not inherit the share of property;

  • and that, since the property transfers to the estate of the co-owner, beneficiaries such as family from earlier marriages may be 'accidentally' disinherited.

If you are not familiar with the concepts and implications, then we suggest reading HMRC's website or consulting with a tax expert or solicitor before creating your will.

The law on wills can seem complicated. We have prepared a number of short articles to explain the more difficult legal concepts. You may like to read some of our articles on writing a will.

When to use this will

You can write a will at any time in your life. Most people consider a new will when their financial circumstances change, or when relationships change. The Law Society advise that you review you will every five years, and that you make a new will after a major life change such as having a child, marriage, separation or divorce. It is possible to change a will without making a new one, but a new one is usually the preferable option.

Document features and contents

  • Revocation of all earlier wills
  • Appointment of executors and trustees
  • Appointment of guardians for children
  • Legacies (gifts of money)
  • Bequests (gifts of possessions)
  • Option to deal with private company shares
  • Option to deal with business partnership interest
  • Instruction to executors to gather in assets
  • Creation of a trust fund in which one beneficiary (or group) has a life interest
  • Creation of a second discretionary trust fund into which the residual estate is placed
  • Option for gift over to a single discretionary trust if the life beneficiary does not survive you by more than a given time
  • Options for small bequests and legacies to children without involving a trust
  • Option to treat past gifts as included or excluded
  • Payments to executor(s)
  • Warning to executors on valuations
  • Alternative wishes for burial / cremation / use of your body for advancement of science
  • Signatures and witnesses
  • Example letter of intent
Sample willSample page from the lifetime beneficial interest and discretionary trust will

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