What is a Will Trust? - Types Of Will Trusts

A Will Trust is a legal arrangement created through a person's will. This type of trust occurs after someone passes away, ensuring their assets are managed and distributed according to their wishes. Will trusts are useful tools for providing financial support to loved ones, especially when certain conditions or timing need to be met before beneficiaries can receive the inheritance. They also offer ways to protect assets and reduce tax burdens for beneficiaries.

In this guide, we'll explain what a will trust is and why it's essential, as well as break down the different types of will trusts that can be included in your estate plan.

What is a Will Trust?

A Will Trust is a specific trust set up in your will, which only becomes active after you die. It lets you choose how and when your assets are distributed to your beneficiaries. Instead of leaving everything to your loved ones outright, you can appoint a trustee who manages the assets in the trust on behalf of your beneficiaries.

This setup is helpful if you have young children, relatives with special needs, or other dependents who may not be ready or able to handle a large inheritance. Will trusts can also provide a way to control how your money is used, such as for education, living expenses, or other essential purposes.

How Do Will Trusts Work?

When you include a Will Trust in your will, you appoint a trustee—someone you trust to manage the assets according to the terms you've outlined. The trustee has a legal duty to act in the best interest of the beneficiaries and distribute the funds as stated in the trust.

For example, suppose you want to ensure your children are financially supported until they turn 21. In that case, you can set up a Will Trust that gives your trustee the authority to manage the money until your children reach that age. In this way, trust will help you have more control over how and when your assets are distributed after your death.

Why Should You Consider a Will Trust?

A Will Trust is beneficial for:

• Protecting vulnerable beneficiaries, like minors or those with special needs

• Controlling how and when your beneficiaries receive their inheritance

• Reducing inheritance tax and other potential financial burdens

• Providing long-term financial security for your family

By using a Will Trust, you ensure that your loved ones are cared for even when you are no longer there to do so.

What Are The Different Types of Will Trusts?

There are several Will Trusts, each serving different purposes depending on your situation and what you want to achieve with your estate planning. Let's take a look at the most common types of Will Trusts:

1. Discretionary Will Trust

A Discretionary Will Trust gives the trustee flexibility over how and when to distribute the trust assets to the beneficiaries. Instead of setting strict rules, you leave the decision-making in the hands of the trustee, who can decide when it's appropriate to give money to a beneficiary based on their needs or circumstances.

This type of trust is beneficial if you have concerns about a beneficiary's ability to manage money or if their situation might change over time. For instance, you may want the trustee to provide more support during tough times, such as unemployment or health issues, and less support when the beneficiary is financially well.

2. Life Interest Will Trust

A Life Interest Will Trust allows someone (usually a spouse or partner) to benefit from the assets during their lifetime. Still, after they pass away, the assets are passed on to another beneficiary, such as your children. This type of trust is commonly used in blended families or situations where you want to ensure your spouse is cared for but want the remaining assets to go to your children eventually.

For example, your spouse could live in your home or receive income from the trust's assets for the rest of their life, but after they pass away, the house or remaining funds go to your children.

3. Bare Will Trust

A Bare Will Trust (an absolute trust) is the simplest form. The assets are held for a specific beneficiary, who receives them outright once they reach a certain age (usually 18 or 21). This type of trust provides fewer protections and flexibility than others, as it automatically transfers the assets to the beneficiary at the set age, regardless of their personal or financial circumstances.

Bare Will Trusts are often used when you want to ensure that young beneficiaries, like children or grandchildren, receive a fixed amount of money when they reach adulthood.

4. Flexible Life Interest Trust

A Flexible Life Interest Trust offers a combination of features from a Life Interest Trust and a Discretionary Trust. With this trust, a primary beneficiary (often a spouse) can receive income from it during their lifetime. Still, the trustee also has the flexibility to distribute capital to other beneficiaries if needed.

This trust is beneficial when you want to ensure a regular income for your spouse and provide for other beneficiaries, like children or grandchildren if unexpected needs arise.

5. Trust for Vulnerable Beneficiaries

A Trust for Vulnerable Beneficiaries is designed to help those who may not be able to manage their finances due to physical or mental disabilities. The trustee manages the trust assets for the beneficiary's care and well-being. These trusts can be particularly beneficial because they provide financial support without affecting the beneficiary's eligibility for government benefits or support programs.

How to Set Up a Will Trust?

Setting up a Will Trust requires careful planning and the help of an experienced attorney. You'll need to:

1.Choose a reliable trustee to manage the assets.

2. Decide on the type of Will Trust that fits your needs.

3. Clearly outline how you want the assets to be distributed and under what conditions.

4. Ensure your Will Trust complies with all legal and tax requirements to avoid complications for your beneficiaries.

Conclusion

Will Trusts offer a flexible and secure way to manage and distribute your assets after you pass away? Whether you want to protect vulnerable loved ones, control how your wealth is used, or minimize tax burdens, a Will Trust can be a valuable part of your estate plan.

For expert guidance on creating a Will Trust tailored to your family's needs, contact the experienced attorneys at Florida Tax Lawyers today!