Probate Executive at Stephensons, Adam Sym explains the mechanics of a will trust, its legal requirements, and whether using one could be right for you.
What is a trust?
To understand what a will trust is, first we must understand the concept of a trust. Early examples of trust mechanisms can be found in ancient Roman law, in the form of the fideicommissum. English trust law began developing during the Crusades in the 12th and 13th centuries and the underlying principles are long established.
A trust is a relationship between three parties. The first party is the 'settlor', who is the person transferring property to or placing property in the control of the second party, the 'trustee'. The trustee is the party that holds the property for the benefit of a third party, the 'beneficiary'.
What is a will trust?
A will trust is simply a trust created within a person's will. In this instance, the 'testator' of the will is the settlor of the trust, as it is their estate that they are choosing to place in the control of the trustees appointed in their will.
The trustees can be one or more individuals over the age of 18, corporate entities or public bodies appointed to administer the trusts created by the will. The testator's will shall also stipulate the beneficiaries of the trust. A specified beneficiary can be an individual or corporate body, although some trusts are established to serve a charitable purpose.
What are the legal requirements of a will trust?
An express will trust (being one created intentionally by the testator, rather than an implied trust being created by the operation of law) has several legal requirements to be valid. The legal test, known as 'The Three Certainties Principle' was created in the decision of Lord Langdale MR in Knight v Knight (1840) 49 ER 58. He held that in order for a valid trust to be created, there must be three certainties:
- Certainty of intention
The first certainty is that of intention. It is insufficient for a testator to merely hope to create a trust; a testator must clearly intend to create a trust. The court will objectively look at the meaning of the wording used in any will (in the context of the entire document) in deciding whether the testator intended to create a trust.
- Certainty of subject matter
The second certainty is that of subject matter. It must be clearly identifiable what estate, whether tangible or not, is the subject of the trust. In Palmer v Simmonds (1854) 2 Drew 221, the phrase "leave the bulk of my said residuary estate..." was used in a will trust. Sir Richard Torin Kindersley held that as the court could not be sure which parts of the residuary estate were to be held on trust, the trust failed.
However, more recent judgments appear to favour the approach of Lord Jessel MR in Repington v Roberts-Gawen (1881-82) LR 19 Ch D 520. In his judgement, he said "...the modern doctrine is not to hold a will void for uncertainty unless it is utterly impossible to put a meaning upon it. The duty of the Court is to put a fair meaning on the terms used, and not, as was said in one case, to repose on the easy pillow of saying that the whole is void for uncertainty."
- Certainty of objects
The third certainty is that of objects. In other words, the beneficiaries of the trust must be clearly identified or at least ascertainable. Reference to the beneficiaries being ascertainable is a recent development in trust law terms, as introduced by the judgment in McPhail v Doulton [1970] UKHL 1. Prior to this case, the relevant test for this certainty was the "complete list" test, meaning that it must have been possible to draw up a complete list of beneficiaries.
This case introduced the "is or is not" test, which had previously been used in cases in relation to trustee's powers in a trust, but not with the certainty of objects. In this case, the class of beneficiaries was any of the officers and employees, or ex-officers or ex-employees, of Matthew Hall & Co Ltd and any relatives or dependents of any such persons. The new test was worded by Lord Wilberforce as follows: "Can it be said with certainty that any given individual is or is not a member of the class?"
Why use a will trust for property?
Trusts are a very useful mechanism for passing on property on death whilst still exercising some control over its use. A common example of this is where a testator owns their main residence in their sole name and occupies it with a partner, who the testator would like to ensure still has a place to reside in the event of their death. The testator however ultimately intends to gift the property to their children from a previous relationship.
With a will trust, the testator could place their main residence into the trust and dictate on what terms the property is held. The trust could stipulate the terms on which the partner can occupy the property and at what point the children are entitled to the property. Properly drafted, a will trust could easily ensure that both the testator's wishes are met and could provide the trustees with all necessary powers they may require to ensure that they can enforce the terms of the trust.
What types of will trusts are there?
There are many other uses for will trusts and furthermore, many different types of will trust. Here are just some of them:
- A bare trust is a simple trust where the beneficiary is entitled to both the income and capital of the trust. This is frequently used to provide for minor children, where the trustees manage the income and capital of the trust until the child is 18 years of age.
- An immediate post-death interest is an interest in possession trust that is created immediately upon the testator's death, where the beneficiary is entitled either to the income of the trust or to enjoyment of the asset in the trust, without being entitled to the trust asset itself. A common example of this is where a testator gives a beneficiary the right to live in their property but upon that beneficiary ceasing to reside in the property, the property passes to a different beneficiary.
- A discretionary trust is a trust where no beneficiary has a right to the income or capital of the trust and any distributions of income or capital are at the discretion of the trustees. A discretionary trust is often used where a testator has a business interest and they want to appoint certain trustees who will be capable of running the business. The class of beneficiaries would likely incorporate all the testator's family, allowing the trustees to flexibly provide for different family members as and when they consider it necessary to do so.
What are the disadvantages of using a will trust?
Will trusts are not however without some disadvantages. Firstly, the role of trustee is one that carries a lot of responsibility and, for many trustees, no reward. The laws governing trustees are complex and often without professional advice, many trustees can find themselves falling foul of the laws and can be personally responsible for certain acts of negligence. Will trusts can also be very time-consuming to properly administer too, as they have their own legal and tax positions to be dealt with.
Should I use a will trust?
Will trusts are a commonly used tool in succession planning and they bring many advantages that are unique to trusts. A carefully considered and professionally drafted will trust can be a great solution to a person's objectives. Testators must however be mindful that will trusts are governed by laws developed over a number of centuries and accordingly, can be very complex.
About the author
Adam Sym is a Probate Executive at Stephensons and specialises in wills, inheritance tax planning, probate and estate administration, lasting powers of attorney, Court of Protection applications, and trusts.
See also
Place a deceased estates notice
What is a deathbed gift and is it legal?
Find out more
Trusts and taxes (Gov)
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Publication date
15 November 2019