Writing will into revocable trust - worth doing?

NLDS

Hi,

My wife and I are going through a process of planning our estate and will writing.

We're both 42, have 2 teenage children and want our estate ultimately to go to them in equal shares in the event of our deaths.

Just to be clear, we initiated this process via co-op legal services (we weren't cold called).

We've had an initial meeting with the estate planner. We made a valuation of our assets and talked through various options.

It's likely that the total value of our estate will break through the £1m barrier before our deaths, and on this basis the estate planner has recommended that we consider writing *each portion* of the estate into a revocable trust on the event of each of our deaths.

The idea of this I believe, is that when the first of us dies, the portion of the estate that goes into the trust is then protected and  can't be used as care home fees for the second of us who is still alive.

Additionally, being a revocable trust, I believe that it is possible to take money from the trust to gift to our children, the beneficiaries. Given the 7 year IHT rule, gifting in this way could enable us to avoid inheritance tax.

The background reading I've done today on this suggests the advice does hold up. However before taking the plunge I am wondering if there's anything I'm missing.

Is anyone else using such an arrangement? 

Are there any other implications I need to be aware of?

The main issue seems to be choosing appropriate trustees. Plus there's the additional cost of writing our wills into trust (I'd rather not pay it if there's no real benefit!)

Thanks for any thoughts on this

Neil

naedanger

You should certainly write a will.

However I would be dubious about the benefits of the revocable trust.

How many years will it be before your estate will exceed £1 million? If it is many years away I think it is silly trying to mitigate that risk now. The rules will probably change many times before then. In any event it is not clear how this trust reduces your IHT bill. Can you give a worked example - showing the IHT with the trust vs the IHT without the trust?

Similarly on care home fees. If either of you have anywhere near £0.5million by the time you need care then there is very little risk your own assets would not fully fund your care. (So any money left to you by your spouse would not be used for your care.)

theoretica

You are also only 42 - several will rewrites from likely care home age and should one of you pass away in the next few years would the other find it a liability to live for decades with the trust for some future potential benefit (unless the rules have been changed by then).

Keep_pedalling

Frankly, putting anything in your will at your age and with the level of assets you are talking about is ridiculous. Neither of you is going to be spending in excess of £500k on care costs. The bigger risk is with a second marriage of the surviving spouse, has anything being included to cover that eventuality?  

xylophone

Neither of you is going to be spending in excess of £500k on care costs. 

Relative's relative was in residential home/care home/nursing home from age 91 to 97 and fully funding her own costs.

In her last year in the nursing home ( despite receiving the nursing care component), her fees were well in excess of £60,000 a year and this did not include extras.....

Keep_pedalling

xylophone said:

Neither of you is going to be spending in excess of £500k on care costs. 

Relative's relative was in residential home/care home/nursing home from age 91 to 97 and fully funding her own costs.

In her last year in the nursing home ( despite receiving the nursing care component), her fees were well in excess of £60,000 a year and this did not include extras.....

Still quite a bit below £500k, and presumably she had income coming in as well as spending capital.

NLDS

Thanks all, and apologies for not keeping up with my own thread! (Too many things going in at the moment!)

The points made regarding premature decision /risk mitigation makes a lot of sense to me.

The biggest risk we take in NOT doing this now, I suppose, is that there is an unexpected event which results in one of us being seriously incapacitated and so needing care earlier in our lives that would be anticipated and also being unable to arrange our affairs.

To mitigate this - supposing we set up lasting power of attorney with eachother as attorney - could the attorney write the will into trust on behalf of the donor?

Thanks for any further thoughts.

mrschaucer

As far as I'm aware, an Attorney is not allowed to write a will on behalf of a Donor.

naedanger

NLDS said:

Thanks all, and apologies for not keeping up with my own thread! (Too many things going in at the moment!)

The points made regarding premature decision /risk mitigation makes a lot of sense to me.

The biggest risk we take in NOT doing this now, I suppose, is that there is an unexpected event which results in one of us being seriously incapacitated and so needing care earlier in our lives that would be anticipated and also being unable to arrange our affairs.

To mitigate this - supposing we set up lasting power of attorney with eachother as attorney - could the attorney write the will into trust on behalf of the donor?

Thanks for any further thoughts.

 So the risk you are worried about is that one of you becomes seriously incapacitated in the next 20 years (assuming you will review/rewrite wills in 20 years time in any event to allow for all changes in your circumstances, legislation etc).

Imagine one of you does become incapacitated in the next 20 years. What all problems will you face?

How high up your list of concerns is the risk that the incapacitated person dies and leaves money to the second person and that money goes to meet the second person's care costs? I suspect if one of you is incapacitated in the next 20 years that will be low down the risk of concerns and isn't worth the cost the co-op will charge to mitigate. (If you are really concerned about the real impact incapacitation might have you should be considering insurance, although it will obviously have a cost.)

PS Obviously the non-incapacitated person could rewrite their will to stop their assets going to the incapacitated person should they predecease the incapacitated person. (If they would want to do that.)

Mrs_pbradley936

Don't make anything too final yet a while because you are still very young. Someone mentioned the possibility of a remarriage but there are others such as any grandchildren that may appear in the future. The best advice we received was to look at your will every 5 years or so to make sure it is still relevant.

In our case I had a cancer diagnoses and we sold a property (a flat that my husband inherited when his mother died) in case we wanted to do anything on my bucket list. I made a recovery and am still here but the flat money is now in NS & I earning very little but it was bringing in £600 per month in rent. In spite of that I am very glad I am still here!