Discretionart will trust

SeniorSam

There have been several comments regarding the use of the Discretionary Will Trust since the changes that now allow the unused nil rate band allowance of the first to die to be passed on the the surving spouse.

Some say that there is no need to use it now and it may be best to cancel such Wills, or make a deed of variation to avoid using the Discretinary Trust clause following the first death.

However, if the Discretionary Will Trust was written with the appropriate clause allowing the executors to accept a charge or I.O.U. in place of the NRB ( which in my humble opinion it ought to be ), then there would still be a requirement to use the full allowance on first death.

I would be interested to know if the DWT wording could be changed to allow UP TO THE NRB to be allocated to the Trust?

In this way, if the DWT was not thought to be best on first death, but there was the potetial of an earlier death of the survivor, then perhaps a nominal £1 could be used to comply with the Trust requirements, so the IOU could still say up to the nil rate band allowance. This would enable minimal or maximum to be used in the Trust and no need for a deed of variation, which may be complex and costly.

Any thoughts on this ?

Sam

cautioussue

I am not sure if I am reading your question right but if after death there is a will with a discretionary trust and you think that it would have been better to not to have had the DWT then if all the trustees agree then the money from the trust could be given to any of the benificieries.
You might still have to tell HMRC but if the trust had not had time to earn any income (interest) then there would not be much they were interested in.
You might want to keep a DWT if there is a issue of long term care because I believe that this money is not counted as part of an individual's assets.

SeniorSam

cautioussue wrote: »

I am not sure if I am reading your question right but if after death there is a will with a discretionary trust and you think that it would have been better to not to have had the DWT then if all the trustees agree then the money from the trust could be given to any of the benificieries.
You might still have to tell HMRC but if the trust had not had time to earn any income (interest) then there would not be much they were interested in.
You might want to keep a DWT if there is a issue of long term care because I believe that this money is not counted as part of an individual's assets.

cautioussue ............. thanks for the reply but I feel you have missed the point.

I believe that my wording may not have helped and I have edited this so that perhaps more people can understand and hopefully comment.

If the Will has a DWT then to change that, a Deed of variation would be needed. This could cause cost and time and possibly a problem if there were minor's or charities as beneficiaries ?

The wording of UP TO THE NIL RSTE BAND could possibly avoid this and I was hoping to havbe comments from the legal beagles or possiblt IFA's who are sufficiently knowlegable in the area of Wills and Trusts?

Perhaps this is to complicated for most?

Sam

Baggysdad

You can't leave it up to the executors to decide whether a gift in a will should be reduced - chaos would ensue if that could happen!!!

Many DWT's enable 'up to the NRB' to be given away - but that is to maximise, not minimise, the gift. Its done to enable the size of the gift to be increased with increases in the NRB.

Having said that, I am of the opinion that DWT's for married people are about as much use as a chocolate fireguard because they use up the IHT allowance on first death, thus limiting the increase in the IHT allowance available when the survivor dies. Such trusts should either be removed from the Will, or replaced with a life interest trust of some sort which protects the capital in the trust (eg against care fees) without using up the IHT allowance on first death, thus maximising the increase in the IHT allowance available on death.
One exception to this advice is for married people where at least one of them has been widowed.

wise_fool

SeniorSam wrote:

The wording of UP TO THE NIL RSTE BAND could possibly avoid this and I was hoping to havbe comments from the legal beagles or possiblt IFA's who are sufficiently knowlegable in the area of Wills and Trusts?

Any gift either to an individual or trust should be sufficiently clear otherwise it would fail for uncertainty.

Aside from the above poster, Localhero has provided a fairly sound commentary on your other thread which warrants no further comment.

http://forums.moneysavingexpert.com/showthread.html?p=24935723&highlight=#post24935723

SeniorSam wrote:

Perhaps this is to complicated for most?

With respect that would seem to include yourself. IFAs and technical legal documents are generally not a match made in heaven in my experience.

SeniorSam

Baggysdad wrote: »

You can't leave it up to the executors to decide whether a gift in a will should be reduced - chaos would ensue if that could happen!!!

Many DWT's enable 'up to the NRB' to be given away - but that is to maximise, not minimise, the gift. Its done to enable the size of the gift to be increased with increases in the NRB.

Having said that, I am of the opinion that DWT's for married people are about as much use as a chocolate fireguard because they use up the IHT allowance on first death, thus limiting the increase in the IHT allowance available when the survivor dies.

Such trusts should either be removed from the Will, or replaced with a life interest trust of some sort which protects the capital in the trust (eg against care fees) without using up the IHT allowance on first death, thus maximising the increase in the IHT allowance available on death.
One exception to this advice is for married people where at least one of them has been widowed.

Baggysdad........... thanks for the reply on this.

The points I was trying to make were that where the DWT states THE NIL RATE BAND ALLOWANCE, I agreed that this can increase as the allowance increases, but if the wording has not included 'UP TO', which the majority of Wills I have seen do not, then there is a specific wish that cannot be changed unless a Deed of Variation is made.

As you may know, the Deed of Variation is not always possible and could be expensive. With the 'UP TO' always being used, then if there was a benefit in the allowance not being used in the Trust at that time, this would give the option of minimal contribution to the Trust and the majority of the unused allowance can pass on until the surviving spouse dies.

An I.O.U. to the Trust can shelter the allowance from care cost without the expense of changing the Wills and incuring more cost with a new trust being set up.

I am simply tring to suggest consideration for a more cost efficient way to word the Wills.

Sam

SeniorSam

wise_fool wrote: »

Any gift either to an individual or trust should be sufficiently clear otherwise it would fail for uncertainty.

Aside from the above poster, Localhero has provided a fairly sound commentary on your other thread which warrants no further comment.

http://forums.moneysavingexpert.com/showthread.html?p=24935723&highlight=#post24935723

With respect that would seem to include yourself. IFAs and technical legal documents are generally not a match made in heaven in my experience.

Wise fool ......... thank you for replying.

I believe that including the wording 'Up To the nil rate band allowance' is not unclear and has been used many times by solicitors drawing up Wills.

Unfortunarely not al, solicitors are as 'tuned in' as they ought to be and some don't even know about the IOU route.

I'm not having a dig at solicitors, as they do a great job, but some have not kept up with changes and really should not be getting involved in Wills where they are not fully competent,...... even if they have obtained their qualifications 30 -40 years ago.

Local Hero did make a comment on an earlier thread, but using the IOU, which could be charged on the survivors property, would secure the allowance from care costs and any new marriage arrangement.

I do agree that many IFA's are not familiar with technical legal documents or Trusts, but in all professions there may be exceptions and ideas that may improve matters, provided one has an open mind.

Sam