Wills: Cost of ambiguity on the rise
Some 36% wills drafted last year contained at least one trust, highlighting the importance of private client lawyers having expertise in trusts, according to a large-scale study.
This reflected both longevity and the rise in blended families – so testators could avoid assets passing to a surviving spouse rather than their children – it said.
Legal software supplier LEAP drew on data from three of its platforms that handled 242,900 wills, including 87,800 wills containing trusts, and 176,300 powers of attorney for its report [1].
Researchers said that as “longevity in the UK increases”, so trust planning rose.
Together with “rising dementia prevalence”, estate planning was shifting “from a short-term, inheritance-focused exercise to a multi-decade asset management strategy”.
More than half (56%) of wills with trusts were made by people agend between 55 and 74, “reflecting a period where estate complexity, asset values and intergenerational planning needs typically converge”.
Beyond the age of 74, “trust inclusion begins to taper off, suggesting that proactive trust planning is most commonly undertaken before later-life decisions become more constrained”.
When it came to types of trust, property was much the most common (70%), with 13% including a discretionary trust and 9% a life interest trust.
“For private client practitioners, this highlights the importance of trust expertise as a core element of modern estate planning, addressing not only tax considerations but also the realities of longer, more complex later lives,” LEAP said.
Trust planning was also “a practical solution” for the rise in blended families, “helping mitigate the risk of sideways disinheritance, in which assets pass to a surviving spouse and are later diverted from the original testator’s children”.
Inheritance disputes in England and Wales highlighted “second marriages, complex family arrangements and capacity-related issues” as common sources of conflict.
“As people live longer and families become more complex, the cost of ambiguity increases. Clear exclusions, supported by appropriate trust structures, are increasingly used to reduce the likelihood of contested wills and to protect family relationships after death.”
When it came to the “underlying drivers” of exclusions in wills, the most common reason by far was estrangement (73%), followed by the need to be ‘financially secure’ (16%) and divorce or separation (9%).
More male than female testators used exclusions, 54% compared to 46%.
The average gross value of estates in the sample was £570,188, with 52% of assets going to spouses and 48% to children.