What is a Will Trust? Understanding the Different Types of Will Trusts

Planning for the future is essential, and one way to protect your family and assets is through a Will Trust. But what exactly is a Will Trust, and what are the different types? In this guide, we'll break it down so you can understand what a Will Trust is, how it works, and the various options available.

What is a Will Trust?

A Will Trust, a testamentary trust, is a legal arrangement after a person dies. A will create a document specifying how a person's assets should be distributed. A Will Trust helps manage the money, property, or investments left behind, ensuring these assets go to the right people at the right time.

A Will Trust primary purpose is to control how your assets are handled after your death. For example, if you want to leave money for your children but only when they reach a certain age, a Will Trust can make that happen.

How Does a Will Trust Work?

When someone sets up a Will Trust, they name a trustee. The trustee is the person or organization responsible for managing the trust according to the instructions in the will. The trustee looks after the assets, distributes them to the beneficiaries, and ensures everything follows the trust's rules. In some cases, a probate lawyer may also be involved to guide the trustee through the legal process, ensuring that all probate procedures are followed and any legal challenges are addressed properly.

The people who receive the benefits from the trust are called beneficiaries. The will can specify when and how the assets should be given to them. This can include age limits, life events, or specific conditions that must be met.

Types of Will Trusts

There are several types of Will Trusts, each designed for different situations. Let's explore the most common types:

1. Discretionary Trust

A Discretionary Trust gives the trustee flexibility in deciding how and when to distribute assets to the beneficiaries. This type of trust is helpful if you want to make sure that the money is given out in a way that best suits the needs of each beneficiary. For example, the trustee can allocate more funds if one child needs extra financial support for education.

Key Features:

• The trustee has complete control over distributions.
• It is helpful if beneficiaries have different financial needs.
• Provides flexibility in managing the assets.

2. Life Interest Trust

A Life Interest Trust provides income to a beneficiary, usually a spouse, for their lifetime. After the primary beneficiary dies, the remaining assets go to other beneficiaries, such as children. This type of trust is common when someone wants to ensure their spouse is taken care of but also wants to leave something for the next generation.

Key Features:

• Provides income to a beneficiary for life.
• Protects assets for future beneficiaries.
• It is common in second marriages to protect children from previous relationships.

3. Protective Trust

A Protective Trust is designed to provide for someone who might not be able to manage their finances responsibly. This could be due to age, a disability, or a history of financial difficulties. The trustee controls the assets, ensuring they are used wisely for the beneficiary's benefit. As part of this arrangement, estate trust administration plays a crucial role in overseeing the proper management and distribution of the trust’s assets. An estate trust administration expert ensures that the trust is administered according to its terms, managing financial decisions, tax matters, and other legal responsibilities, all while safeguarding the beneficiary's interests.

Key Features:

• Protects vulnerable beneficiaries.
• The trustee manages the money to prevent misuse.
• Ensures long-term financial stability for the beneficiary.

4. Flexible Trust

A Flexible Trust allows changes to be made to the trust after the person has passed away. This flexibility can help adapt to unexpected circumstances, like changes in the law or financial needs. The trustee can decide how to distribute the assets within specific guidelines.

Key Features:

• Offers adaptability to changing situations.
• Trustees can make decisions based on current circumstances.
• It is helpful if the future needs of beneficiaries are still being determined.

5. Bare Trust

A Bare Trust gives the assets directly to the beneficiary once they reach a certain age, usually 18 or 21. The trustee has no discretion once the beneficiary reaches this age—the assets must be handed over. This is a simple type of trust often used for young beneficiaries.

Key Features:

• Assets go directly to the beneficiary at a specified age.
• Simple.
• There is no ongoing management once the assets are transferred.

Why Choose a Will Trust?

Setting up a Will Trust can provide many benefits. It allows you to control how and when your assets are distributed, protecting the interests of your beneficiaries. A Will Trust can help avoid family disputes, provide for minor children, and ensure that assets are not misused. It also offers some level of protection from creditors and can minimize inheritance tax. To ensure that your Will Trust is set up correctly and in line with your wishes, it is highly recommended to consult with an estate planning attorney.

How to Set Up a Will Trust?

Creating a Will Trust involves working with a legal professional to ensure everything is set up correctly. You'll need to:

• Write a Will: Specify in your will that you want to create trust and outline the terms.
• Choose a Trustee: Decide who will manage the trust. This can be a trusted family member, friend, or professional trustee.
• Select Beneficiaries: Decide who will benefit from the trust and under what conditions.
• Define the Trust's Terms: Clearly outline when and how the assets should be distributed.

Final Thoughts

A Will Trust is a powerful tool for managing your estate and protecting your loved ones. Knowing that your assets will be handled according to your wishes provides peace of mind. Whether you want to ensure financial stability for your children, protect a vulnerable family member, or provide for a spouse, a Will Trust can help you achieve your goals.

If you want to learn more about Will Trusts or set one up, contact Jostock and Jostock today to discuss your options!