6 Different Types of Wills and Trusts in the UK

Will and Trust are two legal instruments that should be well understood by those considering estate planning. Sufficient knowledge of both legal instruments for asset management will ensure that the right one and the right type are chosen.

For starters, you need to understand that they are different although they can both play a part in estate planning. For more on their differences and the possibility of working with both legal instruments, you can visit: https://www.investopedia.com/.

What better way to understand them than to examine their various types? This will be done here in this article. More particularly, some of the types observed in the UK will be discussed here. So, continue reading to find out about them.

Types of Wills in the UK

A will details the testator’s wishes as to how his assets – savings, investments, real estate, personal belongings, and more; should be distributed among beneficiaries. Its validity is subject to probate laws and would only take effect after the demise of the testator.

It could also take effect if the testator becomes seriously incapacitated. This legal instrument can be readjusted during the lifetime of the testator to reflect whatever changes the testator may wish to affect. Some of the types as seen in the UK include the following:

Mutual

A will explaining how the same assets will be distributed amongst beneficiaries can be made by more than one person. A mutual will is an example of how this is possible. This is given how binding agreements between two or more parties on how assets will be distributed amongst beneficiaries are made. More often than not, this legally binding agreement happens between spouses.

Mirror

There is quite a lot that mutual, and mirror will have in common. The major difference is the legally binding status. While the agreement between the parties is absolutely binding in the mutual type, the legally binding status of this one is not absolute. You can check this link for more on the differences between both types of wills.

Simple

Most wills in the UK, many other parts of Europe, and the entire world fall into this category. As detailed in this legal instrument, an executor is appointed to distribute assets between beneficiaries. If minor children are involved, guardians will also be mentioned in this legal document.

Testamentary Trust

We did mention early on that the same person may need a will and trust. This type of will proves how this is the case. This is given how it leaves room for the provision of a trust to effectively manage and distribute assets after the testator’s death or incapacitation.

In most cases, this type is used for catering to the needs of beneficiaries who need additional protection. This could be beneficiaries with physical or mental disabilities, minors, or those who have proven to be terrible with financial management.

Advance Directive

This is commonly referred to as a living will. It is a type that specifically explains what should be done if the testator becomes incapacitated or if end-of-life care is needed.

So, it can take effect even while the testator is alive but in a critical state. Its peculiarity is that its primary focus is more on healthcare preferences rather than on asset management and distribution.

Conditional

This type only allows beneficiaries to claim transferred assets provided that certain requirements are met. For instance, this could be an academic requirement explaining how the assets cannot be acquired except when the beneficiary gets a college degree.

Types of Trusts in the UK

Speaking of differences between wills and trusts, a trust unlike a will does not have to take effect after the demise or incapacitation of the person who sets it up. Trust can take effect even while the person is still living. Some of the types as observed in the UK include the following:

Simple

It is also known as bare trust. Typically, the beneficiary is granted complete and immediate right to the trust’s capital and income. This is provided they have attained a specified age. More often than not, 18 years is the specified age in the UK. Trustees are appointed but they do not have any more than administrative capacities.

Discretionary

Trustees have more control over this type. This is given how they can determine how much asset a beneficiary gets at any given time. This decision is at their discretion as permitted by the trust.

Life Interest

It is commonly referred to as interest in possession trust. It is selective in the distribution of wealth. This is given how the life tenant (who is the first beneficiary) only has access to the income generated from the trust’s assets. The asset can be transferred to other beneficiaries after the passing of the life tenant.

Mixed

This type leaves room for two kinds of beneficiaries – Capital and Income Beneficiaries. Capital beneficiaries have rights to the asset’s capital while income beneficiaries have rights to the asset’s income. As a result, beneficiaries have varying levels of entitlements.

Accumulation & Maintenance

This type of trust is usually used when minors are involved. Trustees are charged with the responsibility of accumulating income in the best interest of the beneficiaries. The accumulated income will usually be claimed once the beneficiary attains a certain age. This is often the age of 18 or 25 in the UK.

Charitable

The Nobel Prize is one of the long-standing examples of what a charitable trust can do. For more information about the Nobel Prize, you can visit: https://www.nobelprize.org/.

This type of trust supports philanthropic activities. This is considering how a charitable course can be included to benefit from asset distribution.

Conclusion

Estate planning is important for several reasons. It ensures that your assets are well-managed and distributed, especially after your demise. Understanding the various legal instruments that make estate planning possible is therefore essential.

Knowledge of wills and trusts is important for this reason. This is why some of the various types have been discussed here. The advice is that you choose the right types for the proper management and distribution of your assets when the time is right.

This seriously requires the services of the right estate planning legal professional. So, make a concise effort to work with the right legal professional.