What happens to Trusts in Wills following a death?
A Trust written into a Will comes into effect after someone dies. It allows assets such as money, property, or investments to be managed by Trustees on behalf of beneficiaries.
Many people use Trusts in Wills to protect assets, support vulnerable family members, or control how inheritance is passed on in the future. Understanding what happens to these Trusts after death is important, especially for Executors and Trustees who may suddenly find themselves responsible for managing them.
What is a Trust in Will?
A Trust in a Will, sometimes called a Will Trust or Testamentary Trust, is a legal arrangement that only takes effect after the person who made the Will has died.
The Will sets out:
- Who the Trustees are
- Who the beneficiaries are
- Which assets are placed into the Trust
- How the Trust should operate
Once probate has been granted and the estate administration process has progressed, the relevant assets are transferred into the Trust for the Trustees to manage.
What does a Trustee do?
A Trustee is responsible for looking after the Trust assets and acting in the best interests of the beneficiaries.
Their responsibilities may include:
- Managing investments or properties
- Keeping financial records
- Distributing income or capital
- Making decisions in line with the Trust terms
- Handling tax and reporting obligations
Some Trustees are family members or friends, while others are professionals.
What types of Trusts can appear in a Will?
Several types of Trusts can be included in Wills. The right structure depends on the person's family circumstances, financial position, and wishes.
Property Trusts
A Property Trust is often used to protect part of a property for future beneficiaries, while still allowing someone else to continue living there. For example, a surviving spouse may have the right to remain in the property during their lifetime, while the deceased's share is ultimately protected for children or other beneficiaries.
When dealing with Property Trusts, the Will must be drafted correctly. Problems can arise if the Trust wording is unclear or if beneficiaries have been incorrectly identified.
Nil Rate Band Discretionary Trusts
Nil Rate Band Discretionary Trusts (NRBDTs) were commonly used for Inheritance Tax planning before transferable allowances between spouses became available. These Trusts place assets up to the Nil Rate Band threshold into a Discretionary Trust rather than passing them directly to beneficiaries.
The Trustees then decide how and when beneficiaries receive funds. Although these Trusts are less common today, many older Wills still contain them, and they may require specialist advice after death.
Trusts for minors
Children under 18 cannot usually inherit assets directly. A Trust allows money or property to be managed on their behalf until they reach a chosen age.
Trustees may use the funds for:
- Education costs
- Maintenance
- Living expenses
- General welfare
The Will normally states when the beneficiary becomes entitled to receive their inheritance outright.
What happens after the person dies?
Once the death has been registered and probate is obtained, the Executors begin administering the estate. If a Trust exists within the Will, they will eventually transfer the relevant assets into the Trust.
At this point:
- The Trustees formally take responsibility for the assets
- The Trust may need to be registered with HMRC
- Trustees begin managing the assets according to the Trust terms
- Beneficiaries may start receiving income or support, depending on the type of Trust
Some Trusts continue for many years, while others end once a specific event occurs, such as a child reaching adulthood.
Why are Trusts used in Wills?
People include Trusts in Wills for many reasons, including:
- Protecting assets for children or grandchildren
- Supporting vulnerable beneficiaries
- Preserving family wealth
- Providing for a surviving spouse while protecting inheritance for children from previous relationships
- Offering greater control over how inheritance is used in the future
Trusts can provide flexibility and protection, but they also create ongoing responsibilities for Trustees.
Final thoughts
Trusts in Wills can play an important role in estate planning and inheritance protection. After death, Trustees take over responsibility for managing the assets according to the wishes set out in the Will.
While some Trusts are straightforward, others involve ongoing legal, financial, and tax obligations. Understanding how the Trusts work and seeking guidance where needed can help ensure they are managed correctly for the benefit of future generations.
