Berkeley Private Wealth Logo

Children's Flexible Trust


This trust is put in place to give the Testator more control over the inheritance of young persons. Without it the inheritance will be placed into a statutory trust which allows guardians access to the funds with the remainder going to the children at age 18, or 16 if married.
The guardians could need a new car to ferry your children around in, maybe a Range Rover Sport. They may need to build a new extension or buy a new home to make way for your children. Maybe now when they go on holiday they will travel first class with the funds. The money that was meant for your children could easily disappear.
The Flexible Children’s Trust allows people that you trust and have chosen (the trustees) to look after the money and to give money to the children funds for essential needs or whatever is stipulated in your letter of wishes for the trustees to follow. It also allows children to inherit at a later age preventing the inheritance from being wasted. The vesting age can be extended as you require but typically being up to age 25 years. We caution going over the age of 25 due to tax issues which may then apply to the trust.
With regards to the trustees we advise that at least two trustees be appointed because this is the minimum for a trust of land or property. The guardians would have to request money etc. from the trustees to help them look after the children. It is therefore advisable to have at least one trustee who is not a guardian, so that the trustees are not placed into the position of paying monies to themselves (as guardians) on behalf of the young beneficiaries without additional scrutiny.
So, if you don’t want young people to inherit outright at age 18 or guardians to be able to pay money to themselves and would like your own chosen trustees to look after your children’s finances under your guidance (letter of wishes), then the Flexible Children’s Trust enables this.
Disabled/Vulnerable Person’s Trust


Clearly if someone is unable to look after money and assets then giving them free access to these is not a good idea and they could easily be preyed upon.
This type of Trust is essential for disabled people as it will ensure that someone responsible looks after their funds, giving them all the help and support they need. It will also ensure that they don’t lose their right to state help & benefits. These trusts are also treated differently for tax purposes meaning there are savings on taxes such as capital gains tax and inheritance tax.
Some people will give the money intended for a disabled person to another beneficiary so they can look after the funds for them, but of course not only can these funds then disappear or be spent by that person, what happens if they die or become incapacitated. There is a much easier solution by having a trust written into the Will.

Legacy Trust

Legacy Trusts are used for bloodline planning and ensure that only the Testator’s descendants benefit from the trust fund. They are also very useful to prevent the inheritance diminishing over time due to further inheritance tax charges, divorces, bankruptcy etc.
Instead of the funds being distributed on death directly to the beneficiaries, they go into a trust fund. This means that legally the beneficiaries don’t own the asset. However they can receive the income from the trust fund and take loans from it too. The benefit of taking a loan is that nobody will want to take a debt from that person, whereas if they had inherited the funds then they are vulnerable to attacks.
Inheritance Tax
Beneficiaries will usually have assets of their own so any inheritance they receive will likely be taxed again when they die essentially wasting 40%. For example John dies leaving £500,000 to his 2 sons Jack & Paul, Jack & Paul already have an estate worth £325,000 each. If John has a standard Will and just leaves it equally to his sons, their estates now increase to £575,000 each. When Jack or Paul dies a 40% tax will be applied to the £250,000 meaning £100,000 paid to the taxman instead of the grandchildren. Having a Legacy trust avoids this because the £250,000 is loaned from the trust and treated as a debt on death therefore reducing the value of the estate back down to £325,000 and £0 to the taxman. When a beneficiary dies the loan gets repaid to the trust and then can be loaned back out to that beneficiaries children.
Using the example above, imagine Jack is married and then divorces, the £250,000 he has inherited now gets split in half losing £125,000 of the inheritance. However with the Legacy trust in place he has a £250,000 debt reducing his assets back to £325,000. Now he can use that money from the trust to get back on his feet.
If a beneficiary becomes bankrupt maybe through opening a business that ceases trading, the inheritance could be lost and not benefit future generations. With the funds in trust it is protected against creditors.

How the Legacy Trust Works

  • On death all the testators assets go into the Trust for their children
  • The children receive all income from the trust
  • They can take a loan from the trust up to the total amount they are due to inherit
  • If they marry and then divorce, the money from the trust is treated as a loan and therefore doesn’t get taken in the settlement
  • If they become vulnerable, bankrupt or addicted to gambling/drink or drugs then the money is protected
  • When they die, the funds are not subject to Inheritance Tax because it is a debt to the trust, saving thousands.
  • When they die the funds simply go back into the trust and can be redistributed to the grandchildren
  • This keeps going down the generations until the trust ends (125 years from first death). At this point the funds are given out or the loans written off.
  • If each generation set up these trusts, the majority of wealth will stay within bloodline for generation after generation

Right to Occupy Trust

These provide on-going secure accommodation for the person with the right to occupy written into the Will. They do not gain any rights to the property and it does not entitle the holder to income from the property if they choose not to live their or from income from the invested funds if the property is sold. The right to occupy can be set to end at a certain point or event for example:
  • Timeframe – e.g. 10 years
  • Until they are a certain age
  • Until they die
  • Remarriage
  • Co-habiting
  • Moves out

Wealth Management Trust

A common problem these days is that more and more Wills are being contested and more estates are going to the wrong people. This happens in many ways for example – Widows meeting new partners or remarrying, falling out with children, Wills being changed after death of a spouse, people being persuaded to change their Wills whilst vulnerable, beneficiaries destroying the Will because they don’t like what is in it – the list goes on. A Wealth Management Trust allows you to put your assets into trust for the benefit of your spouse/partner and/or children or other nominated beneficiaries. The Trust is only activated after the first death and provides the following benefits.
The surviving spouse benefits from the income and capital in the trust for the remainder of his or her life. If at any time the surviving spouse wants to sell property, buy another, the Trust enables them to do so. The Trust includes powers for the Trustees to pay income and loan capital to the surviving spouse, this is done as an IOU and has to be repaid upon second death meaning the assets go back into the trust and don’t pass to someone else.
This enables Trustees to convert some or all of it into another type of Trust. So if for example, Inheritance Tax Laws change and the trustees consider it financially advantageous for the Trust capital to sit in another type of Trust, they are able to convert it.
Inheritance Tax 
A Wealth Management Trust means that on the death of the first partner, their share of the house and assets do not go to the spouse or partner but directly into trust. The money placed in a Trust is treated for Inheritance Tax purposes as an outright gift to the surviving spouse. Therefore this does not use any of the deceased spouse’s IHT allowance, with the allowance preserved for later on 2nd death.
Care Fees
 A Wealth Management Trust can help prevent against care home fees as the assets are in trust for the benefit of children and not an asset owned by the surviving spouse.
Sideways Disinheritance
People often want their children to inherit the family home in the event of their deaths, without sufficient protection this may not always be possible. Where assets are jointly owned they automatically pass over to the surviving joint owner. This creates a potential problem if the survivor then goes on to remarry or cohabit, leaving the assets to the new wife or partner. The estate may then pass to children of that relationship with the deceased partners children disinherited. A Wealth Management Trust protects against these circumstances.
Placing the assets into Trust means that the house cannot be assessed should a beneficiary be declared bankrupt.
Children from other marriages
Where assets belong to a couple who both have children from previous relationships. The Trust can secure and guarantee an appropriate distribution of assets, ensuring that each parent’s assets go to their children.
Assets can be released to the beneficiaries upon second death and or upon re-marriage of the surviving partner. This guarantees that each child or beneficiary receives the inheritance planned.
  • Upon second death the Wealth Management Trust changes into a legacy trust. The trust then protects your children’s inheritance against bankruptcy and divorce. If they become vulnerable or disabled the trust funds can provide what they need without causing loss of state benefits.
  • It also protects against creating larger inheritance tax issues. This can mean savings of up to 40% on the inheritance you give to your children.
  • It can be used to benefit future generations and keep the inheritance within bloodline.
The trust cannot be contested or challenged unlike a Will. Unfortunately we see so many people lose their inheritance due to Wills being challenged. The costs for legal action are huge and often eat away all the inheritance. The Wealth Management Trust protects against these types of scenarios.

How a Wealth Management Trust works

  • As the trust does not come in to force until one of them dies, if they move address, change their mind, want to change trustees etc. they can do so very easily by just amending the Will that contains the Trust.
  • On death of the first person, their assets go into the Trust instead of being inherited by their partner/spouse. Remember that jointly owned assets will go directly to the joint owner and NOT via the Will/Trust. If they want their share of the property to be protected then we will need to change the ownership from joint to tenants in common.
  • There are no taxes to pay if they are married due to spousal exemption.
  • The trustees chosen by the Testator will manage the trust, usually this is the Testators and one/two others for example: - Mr & Mrs Smith (Testators) & their Brother/Sister/Child/Friend etc.
  • The partner/spouse will receive any income generated by the trust for the rest of their lives, for example: - interest on a savings account.
  • If the surviving partner/spouse wish to move then they can do so.
  • When the surviving partner/spouse dies their assets also go into the Trust for the named beneficiaries (normally Children).
  • This is when the Legacy Trust kicks in (Please see Legacy Trust for details)