A will describes the full and final distribution of the assets of an estate of a deceased person. Once an inheritor receives their portion they can do anything they want with the proceeds.
That’s because a person who leaves a will cannot ‘dictate beyond the grave’. Of course, they can leave hints what they would like to happen. However, if their wishes are not followed through, there is nothing they can do about it.
A simple trust, on the other hand delays the transfer of the bequest. This may be because the beneficiary is under age, or the deceased person believed they were otherwise incompetent to manage the asset. There are various types of trust as we outline below.
The Different Types of Trust in the UK
A person leaving some or all of their estate in a trust appoints a trustee or trustees to manage it. If you have become a trustee, you need to know what kind of trust you are dealing with.
- A bare trust holds on to the inheritance until a defined event happens. This is often when the beneficiary reaches 18 in England and Wales (or 16 in Scotland)
- An inheritance in possession trust allows the interim beneficiary to claim the income from the asset, usually for the rest of their life. When they die, the full asset passes to the final beneficiary. A partner may allow their spouse to benefit initially, and then finally their children
- A discretionary trust is more open ended. In this case the trustee may use their own discretion to decide what’ what’s best to do. This can be the right solution when a beneficiary is not capable (or responsible enough) to deal with money themselves
These are the three main types of trusts you may encounter. Other types include accumulation, mixed, and settlor trusts.
The Role an Executor Versus a Trustee
The Duties of an Executor
An executor of an estate created through a will is duty-bound to stand in the deceased’s place and carry out their wishes, whether they agree with them or not. If the person dies intestate, then they have to obey the rules of succession.
There are no exceptions. That said, if you feel you are being asked to do something fraudulent or criminal you should take legal advice first, and may be able to recover the cost from the estate.
Unlike trustees, executors also have to pay off the creditors and collect any moneys owed. However, in both cases they have a fiduciary duty to put their loyalty to the deceased first, and make full disclosure of their actions when requested.
The Duties of a Trustee
The main difference is a trustee must hold on to the entire estate – or that part placed in the trust – until the conditions in the trust are complete. They have no discretion outside the trust instrument, or the law of the country. When they have obeyed these instructions, their job is done.
If a trust generates a continuing trust then new trustee(s) are required. This may be the same person(s). However they must be careful to separate their roles and record a date when they changed.
Ask Before You Make a Person a Trustee or Executor
These are the main duties of – and differences between – being an executor and a trustee. If you are preparing your will, or creating a trust, always discuss matters with the person first. You will need a willing collaborator ‘on the other side’ to achieve your goals.