Help Me Understand Trusts

I was talking with friends and the conversation came around to asking about trusts. So, even though this is oversimplified, I explained it like this.

🍱 Scenario 1: No Will, No Trust

Imagine Nikki has £50 in her bank account. If Nikki dies without a Will, set rules (called intestacy) decide who gets that £50 — whether it’s who she wanted or not. In some cases, HMRC might help themselves to £20 of it (40% inheritance tax).

🎁 Scenario 2: A Straight Gift

Now, imagine Nikki gives her husband, Chris, the £50 as a gift. He owns it — legally and morally. If he spends it, loses it, or gives it away, it’s gone.

🧾 Scenario 3: A Simple Trust (The Takeaway Analogy)

This time, Nikki gives Chris the £50 and says:

“Please use this to buy us both a takeaway on your way home. If there’s anything left, get something for the kids.”

That’s it.

She’s trusted him to follow those instructions.

She’s now created a simple trust. Let’s break that down:

• Nikki and Chris are the first beneficiaries (they benefit first)
• The kids are the secondary beneficiaries (they get what’s left — the “remainder”)
• Chris is the trustee — he’s holding and managing the money on trust
• The trust fund is the £50
• The terms of the trust: “Buy us a takeaway tonight, and without obligation, consider the children.”

Chris can’t decide to spend it on a few pints in the pub — that’s against the terms of the trust.

🔄 Adding Flexibility: The Discretionary Trust

What if the takeaway is shut? Well, with the above scenarios, the Trust would fail. However if Nikki adds a note that says:

“Ideally get a takeaway, but if something comes up, use your discretion.”

Then Chris can get a meal deal from M&S instead, because it’s still in the spirit of the trust. But he still can’t go to the pub. That’s now a Discretionary Trust — where the trustee has more flexibility, but still follows Nikki’s wishes.

🏠 Let’s Apply This to the Real World

Now, let’s look at how this works with something more serious: the family home. Nikki and Chris own a house together worth £650,000. If Nikki dies without a Will trust:

• The house goes to Chris.
• Later in life, if Chris needs care, has financial difficulty or remarries, the house (or its value) could be lost.
• The children may never inherit what Nikki intended for them.

And on top of that, inheritance tax could be a problem:

• Chris’s estate might exceed £650,000.
• This could lead to over £130,000 in tax when he dies.
  (We’re ignoring exemptions here for simplicity.)
• The house may need to be sold to pay for the tax.

🛡️ Enter the Will Trust

If Nikki split the house 50/50 and wrote, Chris can live in this home as long as he lives, then give my 50% to the children afterwards.  Chris now has a home for LIFE but can't spend, give away, or lose Nikki's half.

“Chris can live here for as long as he likes, but my share eventually goes to the children.”

She could also say:

“I’d like my brother and our eldest child to help Chris make decisions about the house.”

I also want my brother and eldest child to help you (the Trustees) make decisions about the house (the Trust).

Now you’ve got:

• A Property  Life Interest Trust (PLIT/PPT)
• With Discretion if needed
• And a clear chain of Trustees helping protect Nikki’s wishes

If Nikki added a detail allowing for a bit of Flexibility and Discretion, and later Chris needed expensive medical treatment or the kids needed help buying a first home, then if Chris, his brother-in-law, and the eldest child agreed (The trustees), some of the trust funds could be used for these purposes. Nikki could also prepare a helpful note for everyone explaining in more detail what she would like to happen (Letter Of Wishes); this removes the burden of guilt or indecision from the Trustees faced with difficult decisions.

If Chris remarries, goes into care, or passes away, Nikki’s half is still protected for the children.

If needed, the trustees can even agree to use part of the value to help with medical costs or to support the children buying their first home. Nikki might also leave a Letter of Wishes — a personal note to guide everyone without locking them in further, legally.

This is how a Flexible Life Interest Trust (which can convert into a Discretionary Trust) works in practice — and why it can protect your family, home, and legacy.

🧾 Summary: What a Trust Can Do

• Will trusts help distribute a deceased person's assets, allowing control over estate management and division posthumously. Key goals include protecting assets, safeguarding beneficiaries, and reducing inheritance tax liabilities. 
• Protecting Beneficiaries: Will trusts benefit younger or vulnerable individuals who may lack the capacity to manage assets. They allow beneficiaries to use the estate without direct ownership or responsibility. 
• Protecting Assets: Will trusts ensure responsible use of assets, preventing misuse by financially vulnerable heirs. Trustees manage the assets according to intended purposes.
• Tax Efficiency: Will trusts can minimise inheritance tax liabilities by structuring assets within the trust. Consult with a qualified probate practitioner for detailed guidance. A will trust is especially useful for: 
  • Minor Beneficiaries: Hold assets until children reach a certain age or milestone.
  • Vulnerable Beneficiaries: Ensures ongoing care for individuals with disabilities or mental health issues.
  • At-Risk Beneficiaries: Protects individuals from bankruptcy, divorce, or creditor claims, preserving eligibility for government assistance.
  • Complex Families: Provides for blended families according to the deceased’s wishes, such as allowing partners to live in properties while ultimately passing them to children.
  • Property Protection: Safeguards property values from care home fees.
• Of course, no, one size fits all, and there are other considerations, but I hope this helps.

What’s the difference between a Will and a Will Trust?

A Will sets out who gets what when you die. A Will Trust gives more control over how and when that happens — especially useful if you want to protect someone or limit tax. Think of it like car insurance. Will = Third Party, a Will Trust is like a fully comprehensive. Same value, same person, different protection.

Can trusts be changed later?

A Trust in your Will (Testamentary Trust) can be varied or cancelled anytime that you want, whilst you have mental capacity. Flexible Life Interest Trusts, being flexible, can be changed by the trustees. Many Trusts can be varied up to two years after death (Deed of variation) if everyone agrees. Trusts give your trustees flexibility, and you can leave a Letter of Wishes to guide them.

Does this mean I’m giving up ownership?

Absolutely not, it is quite the opposite. Expensive trusts that activate while you are alive (inter-vivos trusts) require you to give up direct control of the assets within them. Testamentary trusts, such as those offered by Fern Wills, provide more control and protection than a will alone. Essentially, you are planning what happens after you are gone in a structured and protective manner.

👋 Final Thoughts

I know we’ve used food and frying pans, but this is serious stuff — and trusts don’t need to be scary. You just need someone who can explain them clearly and set them up properly. If anything in this article made you think, “That sounds like what I want,” then let’s have a proper conversation. At Fern Wills & LPAs, we’ll help you protect the people and things that matter — and we’ll explain every step in plain English.