Money left in a trust in my will

mills112

I went to see a local solicitor a few weeks ago and said that after expenses, tax etc, that 50% of my estate will go to my husband and the remaining 50% will be used to set up a disabled person's trust for my brother, where my husband and my friend will be the trustees.

I received the draft today and it looks like the way it is drafted, everything goes into the trust before the 50% is given to my husband from the trust.

6. "Administration of My Estate

My trustees shall hold my estate upon trust to retain postpone sale or sell it and will.

6.1 Pay any debts, funeral and testamentary expenses;

6.2 Pay all the gifts of money referred to in my Will

6.3 Deal with the remainder ("my Residuary Estate") as I now direct

it then carries on about the trust for my brother etc under 7.2

7.3 As to a 50% share to my husband, "Name of husband", absolutely

7.4 If either share under sub clauses 7.2 and 7.3 fails such share shall return to my Residuary Estate and be distributed to the other beneficiaries pro rata according to their shares"

Am I reading that correctly? That everything goes into the Trust first before it is dished out, where my husband will get 50%?

That doesn't seem to make sense as it can't be a disabled person's trust if my husband is also a beneficiary in it for the 50%?

Update - I found this in the commentary notes

"Clause 6 - provides that your Executors will hold all your estate excluding those assets which you have specifically gifted and shall pay from it any:

• outstanding debts
• funeral expenses
• the costs of the administration
• money gifts
• Inheritance Tax

What is left is referred to as your "residuary estate" or "residue".

This clause includes wording under which the residuary estate may be held on an express trust during the administration period. If the adminstration of the estate continues for more than two years after death, the executors may need to consider whether registration with HMRC's Trust Registration Service."

Anyone heard of "an express trust" during the adminstration period?

poseidon1

As to your 1st question, does clause 7.2 not specifically state 50% of residue to the trust? If not what does it state?

As for your 2nd question, there is nothing in clause 6 and its sub clauses that you have quoted that make any mention of intermediate express trusts of residue during the administration period. Have you quoted clause 6 and all the sub clauses verbatim?

You have only mentioned a small part of the drafted will, what has not been covered in the clauses you chose to quote, is what happens to estate residue if your husband and brother predecease you ie who are the fall back veneficiaries if your primary gifts to brother and husband fail. .

Generally , it is not wise to 'cherry pick ' clauses in a will for explanation, out of context. Clauses you choose not to mention may well have the answers to matters you are not clear about.

bobster2

In general - it is normal for wills to state that the executors/personal representatives will hold all the assets of the estate "on trust" during the period of administration. In these circumstances the executors/personal representatives are the "trustees".

Then if there is a plan to set up some sort of trust that endures beyond the period of administration (e.g. a discretionary trust or disabled persons trust) there will be a clause later in the will setting this up. And it may be given a name to distinguish it from the will trust that exists just for the period of administration.

So as @poseidon1 says - need to see more of the will to interpret the appropriateness of what you've posted here.

mills112

https://forums.moneysavingexpert.com/discussion/comment/82161888#Comment_82161888

i looked at the will that my FIL recently had drafted with the co-op and that also has the clause about the "express trust" during the period of adminstration and his will is just to leave everything to my husband so that is a very simple will. looks like this clause is standard in wills these days. it looks like it just mean whatever monies is held during the administration period for dishing out to the benficiaries.

so 50% to my husband and 50% for the disabled person's trust. The will does not state the exact nature of the trust that is going to be set up for my brother, it just states "The Trust Fund". I guess the details will come when it comes to setting up the actual trust fund as you need to qualify and get approval for the disabled person's trust and if you don't get approval, it becomes an ordinary trust without the tax advantages of the disabled person's trust.

update - I have reread the will and I think i understand it more clearly now as it states

7.1 subject to the above my Trustees shall hold my Resisduary Estate as follows

7.2 As to 50% share to my Trustees on the trust set out in this sub-clause……

then defines the trust for my brother

7.3 As to 50% share to my husband "Name of husband" absolutely

so yeah, the express trust is just the vehicle for the adminstration.

I have also noticed that the will commentary states that a discretionary trust will be set up for my brother rather than a disabled person's trust, so I will need to go back to the solicitor on this.

Albermarle

A Disabled Persons Trust is still a discretionary trust, but I agree that it should be clearly defined in the will what kind of discretionary trust it is.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82162356#Comment_82162356

I would fully expect the trust for you brother include within the preamble of the clause, wording to the effect that your brother is a ..' disabled person within the meaning of section 89 of the Inheritance Tax Act 1984'

To quote LexisNexis ( a legal precedents provider for wills and trust documents) -

Citing Section 89 IHTA 1984 and defining the primary beneficiary under its terms leaves no ambiguity for HMRC, financial institutions, or future trustees regarding why the trust was structured this way and the tax regime it is intended to follow

If the will makes no mention of the section 89 definition in relation to your brothers trust, you should be certainly asking why not.

It is not a matter that should be considered an 'afterthought' after your death since your Will is the operative trust document and the basis upon which the trust is administered in future. It should therefore be complete with regard to all future trustee powers and obligations.

I assume a STEP qualified lawyer is handling this matter?

Incidentally, what does happen to your estate if both your husband and brother die before you?

Albermarle

As a discretionary trust it will be up to the Trustees how it is spent to help the disabled person.

However you can also write a 'guidance letter', ( not sure of the correct name for this) to note your wishes and opinions on how the money should be spent.

This is not legally binding on the trustees in any way, but can be a useful guide, especially if something happens to the Trustees and new ones have to be appointed.

mills112

https://forums.moneysavingexpert.com/discussion/comment/82162500#Comment_82162500

i don't think the solicitor writing the will is a step solicitor, her title is "chartered legal executive", but the letter states that the supervising solicitor is the partner.

they can't really state that my brother is a disabled person in the trust as my brother would need to apply for qualification and that isn't automatic from what i have read because he is not in receipt of the relevant benefits. to be fair, this will is set up in case I die suddenly of an accident as the likelihood of me dying before my brother is like 10% because he is mentally ill and mentally ill people have a life expectancy of up to 20 years less than the average.

if they are all dead before me, then everything goes to my friend, who is the second trustee for the trust.

i will be continually changing the will as my circumstances change as i expect they will do over time so this is not going to be the last will, it is just to make sure if i die suddenly, half of my money goes to my brother instead of all of it going to my husband.

mills112

https://forums.moneysavingexpert.com/discussion/comment/82162568#Comment_82162568

thanks for the clarification that a disabled person's trust is a type of discretionary trust. i think the practicality of how the disabled person's trust is set up should be left until the will actually comes into effect as my brother would need to apply for qualification and at the moment, he doesn't have automatic qualification.

the trustees are my husband and my friend and they are aware of the disabled person's trust so they can apply to get this set up should the will come into play. but as i had said earlier, the likelihood of my brother surviving me is very unlikely unless i have an accident!

yeah, the commentary advice letter did explain about the guidance letter. i had said to the solicitor that i am happy to leave the decisions to the trustees. my main purpose here is to make provision for my brother should i die before him and i am not overly concerned about the practicality of how the trust is going to operate and leave that to the trustees to deal with.

by the way, if the will doesn't mention the disabled person's trust and only mention discretionary trust. does it stop the trustees setting up a disabled person's trust when the time comes? as you say, the disabled person's trust is a sort of discretionary trust.

poseidon1

Concerned a STEP qualified lawyer is not directly involved in the drafting here and a chartered legal executive ( CILEX) does not rise to this standard unless also STEP qualified. You also don't mention whether the partner in charge is STEP qualified, so if neither hold that qualification I would question the extent to which either have quite the same competency expected of STEP qualified lawyers.

It would have been helpful had you thought fit to quote the exact wording of the trust clause for your brother since it is impossible for a classic discretionary trust to be established for a sole beneficiary.

At the very least your husband or other people would need to be included within the discretionary beneficial class in order for there to be other objects in favour of whom discretion can be exercised. It is addressing niceities such as these one can expect from STEP qualified lawyers .

By not quoting the full wording of the discretionary trust it is not clear whether the legal executive has incorporated appropriate trustee powers to amend the terms of the trust to comply with s89 if your brother should later qualify as a disabled person as defined by the statute.

Your right, it is for your husband to administer the trust appropriately when/if the time comes. The question is does your Will as currently drafted gives him the tools to do so? Nothing you have shared so far provides reassurance on that point.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82162662#Comment_82162662

Just to digress a little bit, but still with some relevance for the OP.

As we know from many threads on this forum, and you know specifically due to your professional experience, trusts can often cause more trouble and hassle than they are worth for many people/situations.

Now I know Disabled Persons Trusts are a special case, with special treatment from HMRC etc. and they are a situation where a trust can be useful/recommended for a severely disabled person , often where a younger relative is involved, and a parent is worried about what happens after they die.

Nevertheless they still need administering, probably need some legal ( costly) input at some points, returns to HMRC, and finding a bank to run an account for the trust. I wonder if it is just simpler to leave a trusted family member the money to look after, and benefit the disabled person in the years to come. Often the main needs of the severely disabled person will be the responsibility of social services, and these trust monies are often just used for 'top ups' for clothes, holidays etc. Unless the amounts were very large, they could not be anyway used to pay rent, living costs etc for years ( as an example), as the trust would be empty pretty quick.

Of course one answer is that the 'trusted family member' may get a dodgy partner, become a drug/gambling addict and blow the lot. However if that risk is seen as small, it could be worth taking to avoid maybe unnecessarily burdening someone with the hassles of running a trust. ?

Any thoughts ?