Standard Wills versus Wills and Trusts
The purpose of today’s mind blog is to highlight the main differences between the use of or need for Standard Wills versus Wills & Trusts. It is fair to say that a large proportion of the general public in the United Kingdom either do not understand the difference between these two entities or are at best confused regarding how it all works. We believe that this statement is backed up by the fact that 70% of people in the UK have not yet made a Will. Of course there may be many other reasons that people give for not having made a will.
Some of these reasons may include:-
“ I've not had the time”
“I don’t have anything to leave”
“I don’t like to think about it”
“I’m too young to think about dying”
“My partner will get it all anyway”
There is an answer to each of these reasons, which we will continue to produce blog posts in the coming weeks to provide helpful information. The bottom line here is to understand that the majority of these reasons are in fact excuses. Excuses that are a result of a natural defense mechanism linked to the fear of doing something that you either don’t want to think about or have a lack of understanding on how to move forward with the confidence that you are doing the right thing to protect your bloodline.
Let’s face it when you think of a solicitor or will writing company, we don’t always appear to be that approachable and this perception needs to change in order for more people to investigate Will Writing and the best way to protect their families. You may find it refreshing to know that the majority of Will Writing Companies and Solicitors out there do offer free initial advice on Wills & Estate Planning and are indeed approachable and customer service focused.
This is an absolute must, as without an initial no obligation discussion, to enable us to understand your circumstances and your wishes, whilst at the same time giving you the opportunity to understand the options and costs available to you. How could you make a will, you wouldn't know where to start. So let’s start by explaining the key differences between Wills & Trusts.
A Standard Will
A Will is the only way to ensure your assets pass to those you wish to benefit. If you have no will the laws of intestacy apply and the courts will decide where your assets go. A standard Will is an absolute gift to a chosen beneficiary or beneficiaries. In the event of death you’re chosen Executors would apply for a 'grant of probate' from a section of the court known as the probate registry. Once granted they then ensure your beneficiaries receive a specific percentage of your estate chosen by you. A standard will should be only used in situations where your wishes are not complicated and where you are not concerned about protecting your estate from potential inheritance tax, care fees, remarriage or from debt collectors and bankruptcy.
Without a Will in place
You cannot be sure those you would wish to benefit will actually do so, your partner will not automatically inherit ALL of your estate, “Common Law” partners may not receive anything. Minor children could be taken into care whilst Guardians are appointed and there could be lengthy delays for your beneficiaries due to disputes.
Wills and Trusts
Using Wills and Trusts, as part of your estate planning plan can help you to effectively ring-fence your estate. The trust acts like a safe deposit box for your assets and instead of the estate going to probate the proceeds of your estate are directed to the trust and are afforded protection by the trust. A trust can help you:-
Reduce Tax Payable
Inheritance tax is not usually payable on assets placed in Trust. Inheritance tax is a tax levied on your children after they lose both parents and is charged at a huge 40%. A recent article by money marketing showed that £1.3bn is paid every year needlessly by people who do not take action to mitigate against Inheritance Tax (IHT). With some simple estate planning utilising Trusts you can reduce or eliminate the inheritance tax you pay and increase the amount of inheritance passed down to your children.
Avoid timely and costly probate
Assets placed in Trust can be accessed immediately on the death of the settlor whereas if the asset was left in a Will then the beneficiary would have to wait for the Will to go through probate before any assets could be released from the deceased’s estate. Probate can take many years in some cases and is often an expensive process.
Protect from debt collectors and divorce settlements
Assets placed in Trust are protected from being assessed to repay any outstanding debts your beneficiaries may have. As assets in Trust are not formally classed as part of your beneficiaries estate they are also protected from any future divorce settlement your beneficiary may go through.
Protect your home from being sold to pay for care
Assets placed in Trust (including your family home) are protected from being sold to pay for care home fees as long as enough time has passed between the creation of the Trust and the Settlor's admission to care. (see example image below)
We hope this information helps shed a little light on the differences between Standard Wills versus Wills and Trusts.