Wills, Trusts & Probate Explained
Wills, trusts, and probate are legal terms that describe documents and processes that determine how a person’s assets are distributed or managed. These documents are legally binding once they are drafted and signed, but in some circumstances it is possible to challenge and overturn the terms of a will or trust.
Wills: most people are familiar with wills, the legal documents that define how a person’s assets, including property, possessions, investments, and money, are distributed after their death. If a person dies without leaving a will, their assets pass to their surviving spouse, if they are married or in a civil partnership. If there is no surviving spouse or civil partner, their assets pass to their closest direct descendants or next-of-kin.
Probate: this is the process by which a deceased person’s will is administered after their death. When a will is in probate, the executors of the estate distribute the deceased’s assets in accordance with their wishes as stated in their will.
Trusts: a trust is a legal arrangement where assets are transferred to a person or people, who look after the assets for another person or people. The people who manage the assets are called trustees, and the people who benefit from the trust are the beneficiaries.
There are several reasons why it can be beneficial to hold assets in a trust. For instance, if a child’s parents die when the child is young, the parents’ assets might be transferred to a trust until the child is old enough to make their own financial decisions. Another reason is that, because a trust is its own legal entity, putting assets in a trust confers inheritance tax benefits that help preserve the value of the assets in the long term.
Processes Involved in Setting Up a Will, Trust, or Probate
Drafting a will
Your will is a legal document that dictates what happens to your assets when you die. Making a will allows you to distribute your assets in a way of your own choosing, and can also help you minimise the amount of inheritance tax that will be owed on your estate. As well as distributing your assets in your will, you can also nominate one or more executors to ensure that your wishes are carried out in accordance with the will.
Anyone over the age of 18 years who is sound of mind can write their own will, and if constructed properly a will is a valid legal document, just as if it were drafted by a solicitor. However, if there is any possibility that the will might be contested, or if you are leaving a large or complex estate, it’s a good idea to have the help of a solicitor. If you decide to work with a solicitor, you can discuss with them what you want, and they can write the will for you in legal terms.
Once your will has been written, signed by you, and witnessed by two witnesses, it’s important that it be stored in a safe and secure place. For instance, lodging your will with your solicitor or bank are good ways to keep it safe. A will doesn’t need to be registered with any specific authority in order to be valid, but if you wish you can lodge your will with the London Probate Department for additional security.
Setting up a trust
To set up a trust, you or your solicitor must create a document called a trust deed. This document sets out details such as what assets the trust will hold, how the assets held in the trust will be used, and who the trustees and beneficiaries of the trust will be. You can set up a trust that takes effect immediately or at a point in the future, or only after you die.
Setting up a trust is a more complicated process than drafting a will, because a trust must be set up according to more stringent regulations in order to qualify as a trust, and the legal wording of a trust must be very precise to ensure that it functions in the way that you wish it to. It is not a legal requirement that a solicitor draw up a trust, but it is a good idea to have a solicitor perform this task for you.
The probate process
Probate is the process by which someone’s assets are collected and distributed after their death. In some cases, the executor of an estate must obtain a Grant of Probate from a court in order to start this process. In general, a Grant of Probate is needed only if a deceased leaves assets worth more than £5,000, or if the estate includes assets such as shares or land.
As part of probate, the executor will carry out tasks such as:
- Collecting assets of the estate according to the deceased’s wishes; for instance this might include collecting money from a bank account, selling property and other assets, or inventorying the items in the deceased’s home.
- Making an inheritance tax return and paying the taxes due on the estate.
- Distributing items and money to beneficiaries according to instructions left in the will.
How can a Solicitor Help?
While it is not strictly necessary that a law firm or solicitor be involved in drawing up a will or trust document, it is advisable for many reasons, not the least of which is that a document drawn up by a layperson may not include all the necessary language to ensure it can not be contested or overturned at a later date. Some ways a solicitor can help with wills, trusts, and probate include:
- Provide legal advice on drafting a will or trust document, and the best way to structure the document to minimise inheritance tax.
- Draft documents relating to wills, trusts, and probate.
- Safeguard legal documents such as wills and deeds of trust.
- Act as the executor of a will or as the trustee of a trust.
- Help you apply for a Grant of Probate if you are the executor of an estate.