Wills
In the UK, a will is a legal document that outlines how you want your money, property, and possessions to be distributed after your death. Here’s a brief overview of how a will works in the UK:
- Writing Your Will: You can write your will yourself or get professional advice if your situation is complex. It’s important to make sure your will is clear and reflects your wishes accurately.
- Legal Validity: For a will to be legally valid, it must be:
- Made by a person who is 18 years old or over and has the mental capacity to make the will.
- Made voluntarily and without pressure from any other person.
- Made in writing.
- Signed by the person making the will in the presence of two witnesses.
- Signed by the two witnesses, in the presence of the person making the will, after it has been signed.
- Executor Appointment: You need to appoint an executor, who is responsible for administering your estate and ensuring that your wishes are carried out as outlined in your will.
- Updating Your Will: If there are changes in your life, such as marriage, divorce, or the birth of a child, you should update your will. This can be done through a codicil or by making a new will.
- Inheritance Tax: A will can also help manage the amount of Inheritance Tax that might be due on the value of the property and money you leave behind.
- Intestacy Rules: If you die without a will, your estate will be shared out according to the rules of intestacy, which may not align with your wishes.
- Probate Process: After your death, the executor will need to apply for a grant of probate, which gives them the legal right to deal with your estate according to your will.
Please note there are differences in Scotland and Northern Ireland it is really important to obtain local advice when setting up your will.
Here at Vesta we don’t deal with wills directly however we have several partners who can help. Send us your details using the form at the bottom of this page if you are interested.
Trusts
A life insurance trust is a legal arrangement that allows you to manage how your beneficiaries receive the proceeds from your life insurance policy. Here are the key points about life insurance trusts:
- What Is a Trust?: A trust is a straightforward legal arrangement where you set aside assets (such as a life insurance policy) to benefit specific individuals, known as beneficiaries. The trust is managed by one or more trustees (who can be family members, friends, or legal professionals) until it pays out to the beneficiaries. The pay-out can happen upon your death or on a specified date, such as when a child turns 18.
- Benefits of Putting Life Insurance in Trust:
- Avoiding Inheritance Tax: When your life insurance policy is placed in a trust, its value is generally not considered part of your estate. This means it won’t count towards the inheritance tax threshold. The proceeds go directly to the beneficiaries, bypassing probate.
- Streamlined Process: Placing your policy in trust avoids the need for probate. Instead of a lengthy legal process, a death certificate suffices for the policy to pay out.
- Control Over Distribution: You can specify how the beneficiaries receive the funds, ensuring your intentions are followed.
- Types of Trusts for Life Insurance:
- Discretionary Trusts: Trustees have discretion about which beneficiaries to pay, guided by your letter of wishes. This letter outlines your intentions for administering the trust.
- Flexible Trusts: These have default beneficiaries entitled to any income from the trust. Discretionary beneficiaries receive capital or income if appointed by the trustees.
- Survivor’s Discretionary Trust: Pays out to the surviving policy owner (e.g., your partner) before other beneficiaries.
- Absolute Trust: Beneficiaries are named individuals who cannot be changed. Pay-outs are quick, and inheritance tax is minimal.
Business Trust for Shareholder protection
A business trust for shareholder protection is a legal arrangement designed to safeguard the interests of a company’s shareholders in the event of a shareholder’s critical illness or death. Here’s how it typically works:
- Purpose: The primary goal is to ensure that the control of the company remains with the current shareholders or designated individuals, rather than passing to an unintended party, such as a deceased shareholder’s family members.
- Life Insurance Policies: Each shareholder takes out a life insurance policy on their own life. The policy is then written under a business trust for the benefit of the other shareholders.
- Trust Arrangement: The business trust is usually set up as a discretionary trust, which means the trustees have the discretion to manage and distribute the trust assets — in this case, the proceeds from the life insurance policies.
- Funding Share Purchases: Upon the critical illness or death of a shareholder, the trust receives the funds from the life insurance policy. These funds are then used by the surviving shareholders to purchase the shares of the critically ill or deceased shareholder, ensuring business continuity.
- Shareholder Agreement: Often, a shareholder agreement is in place that works in conjunction with the trust. This agreement can include ‘pre-emption’ rights, giving existing shareholders the first opportunity to buy the shares before they are offered to outside parties.
- Tax Implications: The arrangement can have tax implications, and it’s important to structure the trust and insurance policies correctly to avoid potential issues with inheritance tax or gift with reservation rules.
- Legal Documentation: The company’s articles of association and any shareholder agreements should be reviewed and possibly updated to align with the shareholder protection strategy.
- It’s crucial for companies to seek professional legal and financial advice when setting up a business trust for shareholder protection to ensure that it meets the company’s specific needs and complies with relevant laws and regulations.
Here at Vesta we can help you decide which trusts are applicable to your situation. It is usually more straightforward than the above options make it look.