Asset preserver wills

This type of will is suited to you if you would like to protect the capital value of your estate for your children. The most common scenario where this type of trust is used is for the married couple or civil partnership.

The idea is that the first spouse to die would like to make sure that the inheritance tax relief offered in the form of spouse relief is available but an outright gift of the estate to the survivor is not preferred. This may be because both parties wish to make sure that the estate ultimately ends up with their children and is not vulnerable to second marriage, inheritance tax on the survivor’s death or business related reasons (insolvency for example).

In short the will disposes of the estate to a trust that gives the survivor a right to income only. The trustees are given wide powers over the capital of the trust fund and therefore they could advance capital to the spouse if there is a need or onto new trusts for children.

Any funds that remain in the trust on the survivor’s death may be left subject to the trustees’ discretion or pass outright to children. This structure benefits from absolute spouse exemption so no inheritance is due on the first death.

 

Case example

John and Amy are married to each other, having been married before. They have children from the previous marriage and two children aged two and five from their own marriage.

Their estate is worth about £1million including their family home, some savings and a portfolio of investments held between them. John also owns a holiday home acquired from his previous marriage and Amy received a cash sum as part of the financial agreement on her divorce.

Their current marriage is settled and while both John and Amy want to provide for each other they also wish to make sure their children from both marriages inherit their respective estates.

One answer is to use a life interest trust (the asset preserver will). Let’s say John dies first. His estate passes into a life interest trust allowing Amy to benefit from the income and possibly some capital if the trustees agree there is a need (such as the cost of medical treatment).

If Amy no longer requires access to the trust fund because she has sufficient wealth of her own, the trust fund can be passed to John’s children during Amy’s lifetime. In any event when Amy passes away or remarries the funds in the life interest trust pass to John’s children automatically.

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