Many people feel nervous when they are asked to act as an Executor and Trustee under a family member’s Will. In practice, however, straightforward family trust arrangements are often much less daunting than people initially fear.
This guide explains, in plain English, what is usually involved in acting as a Trustee of a life interest Will trust (sometimes called a property protection trust).
What is a life interest Will trust?
A life interest Will trust is a very common arrangement used in Wills, particularly for married couples and long-term partners.
Typically, on the first death, the deceased’s share of the family home passes into a trust created by the Will. The surviving spouse or partner is then given the right to continue living in the property during their lifetime (or sometimes until they move permanently into care or choose to leave the property).
Following the death of the surviving spouse or partner, the trust assets then pass to the ultimate beneficiaries chosen by the person making the Will, commonly children or other family members.
Life interest trusts are sometimes also referred to as:
- property protection trusts;
- protective property trusts; or
- interest in possession trusts.
What does a Trustee of a Will trust actually do?
The Trustees are responsible for ensuring that the terms of the Will trust are followed properly.
People are sometimes concerned that acting as a Trustee means taking on a highly technical or burdensome role. In many straightforward family arrangements, this is not the case.
In practice, the role is often relatively administrative and supervisory in nature. Trustees are not generally expected to become legal or tax experts themselves.
What happens after the first death?
Depending upon the circumstances at the time, there may be:
- an application for a Grant of Probate;
- Land Registry work relating to the property;
- trust registration requirements;
- inheritance tax reporting requirements; and/or
- some ongoing trust administration.
The exact requirements will depend upon the estate, the assets involved and the rules in force at the relevant time.
Will the Trustees personally have to deal with all of this?
Not usually.
In practice, Trustees commonly obtain professional assistance from solicitors, probate departments, trust administrators and/or accountants in relation to any ongoing administrative or compliance requirements.
This type of work is often routine trust administration rather than specialist legal drafting work.
Is acting as a Trustee difficult?
In most straightforward family trust arrangements, acting as a Trustee is not usually as difficult as people initially fear.
Many family Trustees are ordinary relatives or friends acting carefully and sensibly with occasional professional support where needed.
Will Trustees need to file tax returns?
Potentially yes, although in many straightforward arrangements the practical administration is relatively modest.
Depending upon the circumstances, this may include:
- maintaining basic trust records;
- preparing simple annual trust accounts and trustee minutes;
- trust registration compliance; and
- occasionally trust tax returns if required.
However, where the trust simply holds a share of a property and generates no separate income, the ongoing tax position may be relatively straightforward.
Do Trustees need their own solicitor?
Usually not.
In most straightforward family trust arrangements, Trustees do not normally need separate independent legal advice before agreeing to act.
However, Trustees are always entitled to obtain independent legal advice if they particularly wish to do so.
Who pays the costs of administering a Will trust?
Professional costs relating to the administration of the estate or trust would normally be payable from the estate and/or trust assets rather than personally by the Trustees themselves.
Are Trustees personally financially liable?
Trustees are under a legal duty to act properly and in good faith. In ordinary family trust arrangements of this nature, provided Trustees act reasonably and take appropriate professional advice when needed, personal difficulties or liabilities are uncommon.
Final thoughts
Most family Trustees are ordinary people helping to administer practical family arrangements following the death of a loved one. In many cases, the practical administration involved is fairly limited and professional assistance can be obtained where needed.
This note is intended as a general overview only. The exact administration and legal requirements applicable to any trust will depend on the wording of the Will, the assets involved, the family circumstances and the law and tax rules applying at the relevant time.
Making a Will
If you would like advice regarding Wills, Lasting Powers of Attorney or estate planning, please feel free to get in touch by email for further information regarding the services offered by Chiltern Wills.
Email enquiries are preferred in the first instance.
Written by Rebecca D’Arcy
Chiltern Wills
Buckinghamshire
