Trust vs. Will: Which One is Right for You?

In practice, while it is widely accepted that everyone needs a Will, not everyone needs a Trust. In this article, we will take a closer look at the purpose of a Will and a Trust so that you can decide which will meet your own needs. 

What is a Will?

A Will is a legal document that sets out how you want your assets (e.g. money, personal possessions, property, investments, and businesses) to be distributed following your death. Having a Will in place makes sure that your wishes are completely clear. Within your Will, you can describe in detail which beneficiaries should receive parts of your estate and the name of the Executor/s whom you trust to ensure that your wishes are followed.

If you do not have a Will, your estate will be distributed according to the ‘rules of intestacy’. The rules of intestacy define in set order who is entitled to a share of your estate, even if this is against your own personal wishes.

It is essential that your Will is drafted professionally to ensure that it is legally valid and also kept reviewed periodically to make sure it is up to date. It is not uncommon to encounter Wills that cannot be used or are challenged because they were poorly written, not witnessed correctly, or there is doubt regarding the capacity of the person who wrote it. 

What is a Trust?

A Trust is a legal structure into which you can place assets such as property and money to ensure they are protected. With a Trust in place, you can hand down your assets after your death, but you retain more control over how those assets are managed and how they are used for the benefit of your beneficiaries. Trusts require three key parties: the settlor (you), the trustee (someone you appoint to manage the trust), and the beneficiary. 

Do I need a Will and a Trust?

It is important for everyone to have a Will, regardless of how much money or assets they hold. Drafting a Will ensures that your wishes will be carried out and there will be no disagreement between family and friends regarding who should receive part of your estate. Wills can also set out wishes other than those relating to inheritance. Your Will, for example, may include your wishes for your funeral, including the type and location.

You may need a Trust in addition to a Will if you:

• Want to protect assets from claims by a former spouse or by creditors, etc.
• Minimise the impact of inheritance tax
• Want to ensure that the assets are managed according to your preferences
• Want greater privacy and confidentiality – remember, Wills and probate documents become are publicly available
• Want to avoid delays caused by the probate process or
• Have a complex family structure

If you have a relatively simple estate with minimal assets, it is likely that a Trust is not needed. On the other hand, if you have substantial assets (e.g. properties, money, businesses, pensions, and investments), a Trust may be appropriate.

Key considerations

When deciding whether to set up a trust, there are a number of additional considerations to bear in mind. In terms of cost, Wills are generally more affordable than trusts, making them available and accessible to more people. Trusts involve higher upfront costs due to their complexity but can provide significant long-term financial benefits by avoiding probate expenses and potentially reducing inheritance tax. For this reason, we recommend discussing your requirements with an estate planning Solicitor who will help you understand the financial implications of each option.

Another key consideration is flexibility. Wills are often seen as having greater levels of flexibility because they are easy to amend. If your circumstances change, you can simply change your Will or add a Codicil to reflect your new wishes. On the other hand, Trusts, particularly irrevocable Trusts, offer less flexibility, but this can be an advantage if you want to create a more secure, unalterable plan.

Wills involving estates typically go through probate, which can be time-consuming and expose your financial affairs to public scrutiny. Probate is not needed for trusts; however, it makes the transfer of assets to beneficiaries faster and more private. 

Another key consideration is whether you have a complex family structure (e.g. a blended family with children from a former marriage). Trusts can be extremely beneficial in overcoming complex family dynamics and ensuring the well-being of loved ones with special needs.

Wrapping up

Whether you need a Will and a Trust ultimately depends on your unique circumstances and priorities. A Will without a Trust may be sufficient if you have a simple estate with limited assets. The creation of a Trust offers added benefits for individuals with larger estates, complex family dynamics, or specific wishes regarding asset management. By carefully considering your own financial situation, family structure, and long-term goals and seeking professional advice, you can make an informed decision about how you want your hard-earned estate to be handled in the event of your death.

For a free initial telephone consultation to discuss your Will or Trust, please speak to a member of our private client law team in complete confidence on 0208 300 6666.