Trusts & Estate Planning Beyond the Will

While wills are essential for outlining your wishes after death, many individuals choose to take their estate planning further by using trusts as a powerful tool for control, protection and long-term planning. Trusts can offer valuable benefits both during your lifetime and beyond, particularly when it comes to managing wealth, minimising tax and providing for others with precision.

At Franklins Solicitors, we regularly advise clients on how to incorporate trusts into their wider estate strategy. When used correctly, they offer flexibility, clarity and peace of mind. But without proper legal guidance, they can also lead to unexpected risks.

A Trust is a legal arrangement where one or more people (the trustees) hold and manage assets on behalf of others (the beneficiaries). The person who creates the Trust is known as the settlor. Trusts can be used to pass on wealth, protect vulnerable individuals, manage property ownership or structure family business succession.

Contrary to common belief, trusts are not just for high-net-worth individuals. They are widely used in a range of everyday situations, including:

The key is to choose the right type of Trust and ensure it is properly established and maintained.

Trusts can address specific concerns that a basic will cannot. Common situations where trusts prove valuable include:

A life interest Trust allows your spouse to benefit from assets during their lifetime (for example, living in the family home or receiving investment income) while ensuring the capital ultimately passes to your children from a previous relationship.

Rather than inheriting a large sum at 18, funds can be held in Trust and released at specific ages or milestones, such as completing education or buying a first home.

Trusts can support relatives with disabilities or mental health conditions without affecting their entitlement to means-tested benefits.

Trusts can facilitate orderly handover of family businesses, protecting continuity and commercial value across generations.

Certain Trust structures can help protect part of your estate from local authority assessment, though this must be approached carefully to avoid deprivation of assets challenges.

There are several types of trust commonly used in estate planning, each suited to different circumstances:

The simplest form, where the beneficiary has an absolute right to both the capital and income. Often used for straightforward gifts to children or grandchildren.

Also known as an interest in possession trust. The beneficiary receives income or use of an asset (such as living in a property) during their lifetime, with the capital passing to others after their death.

The most flexible option. Trustees have discretion over how and when to distribute income and capital among a class of beneficiaries. This allows them to respond to changing circumstances and individual needs.

A trust created within your will that only takes effect after your death. This avoids the need for a separate trust deed during your lifetime.

Each type has different tax implications and suitability depending on your circumstances.

A declaration of trust is a specific type of legal document used to record how property is owned when two or more people have unequal financial interests. This is particularly common where one person has contributed more to a property deposit or mortgage, or where parents have helped a child buy their first home.

Without a declaration of trust, assumptions can lead to costly disputes later, especially if a relationship breaks down or if one co-owner dies. Having this documentation in place helps to clarify contributions and entitlements from the outset, offering protection and transparency for all parties involved.

In recent years, some individuals have been encouraged to gift their property into a trust as a way of avoiding care home fees or inheritance tax. While this strategy might sound appealing, it can be highly risky and, in many cases, ineffective.

If not done correctly, such transfers may be challenged by local authorities under deprivation of assets rules. They could also create unexpected tax liabilities or even result in the loss of legal control over your home.

At Franklins, we strongly recommend seeking advice before making any decisions about gifting assets. A full understanding of the legal and financial consequences is essential before proceeding.

Appointing trustees is one of the most important decisions when setting up a trust. Trustees have wide-ranging legal responsibilities, including:

When choosing trustees, consider people who:

Many families appoint a combination of trusted family members and professional trustees (such as solicitors) to balance personal knowledge with professional expertise and continuity.

Since the introduction of the Trust Registration Service (TRS), many Trusts, including some that were previously exempt, are now required to be registered with HMRC. This includes certain bare trusts and co-ownership arrangements that many people do not realise qualify.

Failure to register a Trust can result in penalties and complications, especially when administering an estate or selling a property. Our team provides clear guidance on whether your Trust needs to be registered, and we can manage the registration process for you.

The TRS is part of HMRC’s efforts to improve transparency and prevent money laundering. Even if you created a Trust years ago, you may now have registration obligations.

Creating a trust is not a one-off event. Trusts require ongoing administration, which can include:

Professional trustees typically handle these responsibilities as part of their service. For family trustees, understanding these obligations before agreeing to act is essential.

Trusts have complex tax implications that vary depending on the type of trust and when it was created. Key tax issues include:

Assets placed in most trusts during your lifetime are treated as chargeable lifetime transfers and may trigger an immediate tax charge if they exceed the nil-rate band (currently £325,000). If you survive seven years after creating the trust, the assets generally fall outside your estate for inheritance tax purposes.

Income generated within a trust is typically taxed at higher rates than income received by individuals. The specific rates depend on the trust type.

Trusts have their own capital gains tax allowance, currently half the personal allowance available to individuals.

Professional advice is essential to understand how these taxes apply to your specific situation and to structure trusts in the most tax-efficient manner.

Trusts can be a valuable part of your estate plan, but they must be approached with care. With the right advice, they offer flexibility, protection and a way to meet your family’s needs long into the future. Without proper legal input, however, they can be misunderstood, misapplied and potentially challenged.

At Franklins, we work closely with individuals, families and business owners to create bespoke trust and estate planning solutions that align with your goals. Whether you need to create a trust, register an existing one or understand your options, we are here to help you plan with clarity and confidence. 

To discuss trust planning or any aspect of your estate, contact us to arrange a consultation with our private client team.