Trust Planning - What is it?

Trusts are used to protect wealth from an attack which would result in their value reducing or being diverted to an unintended recipient. Trusts can be created on death in a Will or during lifetime.

Will Trusts

Couples are able to use their Wills to shelter assets in a trust in such a way that if the survivor ever needs residential or nursing home care, the assets held in the trust cannot be assessed and used to pay care fees. Had the assets not been held in a trust then their value could be used to pay care fees. The respective shares of property are held in a property trust and money in a life interest trust.

Some couples, especially those in second marriages, may be concerned that if the survivor of them inherits everything, they can then change their Will to disinherit the family of the first partner to die. Couples with such concerns can structure their Wills in such a way that when the first partner dies, the surviving partner has the enjoyment of their share of property through a property trust and / or money through a life interest trust. When the surviving partner dies, the assets in the trust are guaranteed to pass to the family of the first partner and the assets of the surviving partner pass to their family.

People who have beneficiaries who are going through a period of misfortune, such as bankruptcy, divorce or poor state of mind or are in receipt of means tested benefits can create a discretionary trust in their Will which enable the inheritance to be managed by trustees on their behalf without it affecting any benefits.

Couples who are not married and couples who are married but at least one of them has previously been widowed can include a discretionary trust with IOU in their will to maximise their inheritance tax allowances and therefore minimise (or eliminate) inheritance tax due on their estates.

Lifetime Discretionary Trust

Most (but not all) assets, including property and money are transferred to a trust during lifetime. The person making the transfer is called a settlor and is a beneficiary of the trust, so that they can continue to benefit from the assets that are transferred to the trust. The settlor is also a trustee of the trust along with others chosen by them (usually family members to deal with family issues and a solicitor to deal with technical issues) so they have an influence and an involvement in decisions regarding the assets held in the trust.

The settlor gives up ownership, but not benefit, of the assets placed into the trust and the benefits of such an arrangement are:

  • The responsibility for the management of the assets is transferred to the trustees.
  • The settlor can take as much or as little interest in the managements of teh trust assets as they wish.
  • The estate of the settlor is reduced so that probate is not required to administer their estate on their death. When the settlor dies, the trustees simply distribute the estate, a process that can be completed in days. The distribution is made according to lifetime directions made by the settlor which can be changed by the settlor during their lifetime without having to make a new Will.
  • If the settlor loses mental capacity, the need to register a lasting power of attorney to enable attorneys to manage their finances can be avoided as the assets held in the trust can be managed by the remaining trustees.
  • If the settlor has contentious family circumstances the impact of costs and delays shoul the Will beg contested because if the value of the estate is held in a trust, there is no estate on death on which to make a claim - so there is no point in making a claim!
  • Provided that the settlor transfers of assets into a trust when there is no foreseeable need for care, then any assets transferred into a trust are likely to be exempt from assessment for use to pay care fees should the settlor subsequently need move into a care home.


For more information about Care Homes, please see our Care Homes Factsheet.

The information on this page is necessarily brief and should not be used as the basis to create a trust. Our consultants are happy to arrange a no obligation visit to discuss in detail the individual advantages, disadvantages and consequences for anyone interested in creating a trust.

Please contact us or call 0845 1259015