Wills, Trusts & Estates · Plain English Guide

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Understanding Wills, Trusts and Estates

A plain English guide to the key concepts in estate planning — what a will is, how trusts work, what happens to your estate when you die, and how lasting powers of attorney fit into the picture.

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What is an estate?

Your estate is everything you own at the time of your death — your home, savings, investments, personal possessions, and any other assets. It also includes any debts you owe. Your estate is what is distributed after your death, either under your will or under the intestacy rules if you die without one.

Some assets — such as jointly owned property, pension death benefits, and life insurance written in trust — may not form part of your estate for probate purposes. Understanding which assets pass through your will and which do not is an important part of estate planning.

Key terms explained

Estate

Everything you own at the time of your death — property, money, investments, personal possessions, and any other assets. Your estate is what is distributed after your death, either under your will or under the intestacy rules.

Will (or Last Will and Testament)

A legal document that sets out your wishes for what happens to your estate after your death. It appoints an executor to administer your estate, names your beneficiaries, and can appoint guardians for minor children.

Executor

The person (or persons) you appoint in your will to administer your estate after your death. The executor's role includes collecting assets, paying debts, and distributing the estate to beneficiaries.

Beneficiary

A person or organisation who receives a gift or share of your estate under your will (or under a trust). Beneficiaries can be individuals, charities, or other organisations.

Intestacy

What happens when someone dies without a valid will. The intestacy rules under the Administration of Estates Act 1925 determine who inherits — and the outcome is often not what the deceased would have wanted.

Trust

A legal arrangement in which assets are held by one person (the trustee) for the benefit of another (the beneficiary). Trusts can be created during your lifetime or by your will, and are used for asset protection, tax planning, and providing for vulnerable beneficiaries.

Trustee

The person (or persons) who holds and manages assets in a trust for the benefit of the beneficiaries. Trustees have legal duties to act in the best interests of the beneficiaries and in accordance with the terms of the trust.

Probate

The legal process of administering a deceased person's estate. In most cases, the executor must obtain a Grant of Probate from the Probate Registry before they can deal with the estate's assets.

Lasting Power of Attorney (LPA)

A legal document that appoints someone you trust (your attorney) to make decisions on your behalf if you lose mental capacity. There are two types: Property & Financial Affairs, and Health & Welfare.

Inheritance Tax (IHT)

A tax on the estate of someone who has died. In England and Wales, IHT is charged at 40% on the value of the estate above the nil-rate band (currently £325,000). Various reliefs and exemptions can reduce the amount payable.

How a will works

A will is a legal document that sets out your wishes for what happens to your estate after your death. To be valid in England and Wales, a will must be in writing, signed by you in the presence of two independent witnesses, and signed by both witnesses in your presence.

You make your will

You instruct a solicitor, who takes your instructions and drafts the will. You review it, sign it in front of two witnesses, and the witnesses sign in your presence.

You store your will safely

The original signed will should be stored safely — with your solicitor, at home in a secure place, or registered with the National Will Register. Tell your executor where it is.

On your death, your executor acts

Your executor locates the original will, registers the death, and applies for a Grant of Probate if required. They then collect your assets, pay your debts, and distribute your estate.

Your estate is distributed

Your executor distributes your estate to your beneficiaries in accordance with your will. They keep records of all distributions and obtain receipts from beneficiaries.

Types of will

Single will

A will made by one person, setting out their wishes for their estate. The most straightforward type of will.

Mirror wills

Two separate wills made by a couple — typically spouses or civil partners — that mirror each other. Each leaves their estate to the other, with the same provisions for what happens if both die simultaneously.

Will with testamentary trust

A will that creates a trust on death. Used to protect assets for vulnerable beneficiaries, minor children, or where you want to control how and when assets are distributed.

Mutual wills

Wills made by two people under a binding agreement not to change them after the first death. Rarely recommended — they can cause significant problems and are generally inflexible.

How trusts work

A trust is a legal arrangement in which one person (the settlor) transfers assets to another person or persons (the trustees) to hold for the benefit of one or more beneficiaries. The trustees have legal ownership of the assets, but they must manage them in accordance with the terms of the trust and in the best interests of the beneficiaries.

Trusts can be created during your lifetime (a lifetime trust or inter vivos trust) or by your will (a testamentary trust, which comes into effect on your death). They are used for a wide range of purposes — from protecting assets for vulnerable beneficiaries to reducing inheritance tax.

Common types of trust

Bare trust

The simplest form of trust. The beneficiary has an absolute right to the assets and any income. Often used for children — the assets pass to them at age 18.

Discretionary trust

The trustees have discretion over how and when to distribute income and capital to beneficiaries. Widely used for inheritance tax planning and protecting vulnerable beneficiaries.

Life interest trust

A beneficiary (the life tenant) has the right to income from the trust assets during their lifetime. On their death, the assets pass to the remainder beneficiaries. Commonly used to protect a surviving spouse while preserving assets for children.

Testamentary trust

A trust created by a will, which comes into effect on death. Used to protect assets for minor children, vulnerable beneficiaries, or to achieve tax planning objectives.

Property trust

A trust used to protect a share of the family home. Often used by couples who own property as tenants in common to ensure their share passes to their children rather than a future partner of the survivor.

How lasting powers of attorney fit in

A lasting power of attorney (LPA) is not part of your estate plan in the traditional sense — it operates during your lifetime, not after your death. But it is an essential companion to your will and any trusts you put in place.

Property & Financial Affairs LPA

Allows your attorney to manage your bank accounts, pay bills, deal with property, and handle investments. Can be used before or after you lose capacity, depending on how you set it up.

Health & Welfare LPA

Allows your attorney to make decisions about your medical treatment, care arrangements, and (if you choose) life-sustaining treatment. Can only be used once you have lost capacity for the specific decision.

Understanding inheritance tax

Inheritance tax (IHT) is charged at 40% on the value of your estate above the nil-rate band (currently £325,000). An additional residence nil-rate band (up to £175,000) may be available if you leave your home to direct descendants. A well-structured will and trust arrangement can significantly reduce the IHT payable on your estate.

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Frequently asked questions

What is the difference between a will and a trust?

A will is a document that takes effect on your death and sets out who inherits your estate. A trust is a legal arrangement in which assets are held by trustees for the benefit of beneficiaries — it can operate during your lifetime and/or after your death. A will can create a trust (a testamentary trust), but trusts can also be set up independently of a will.

What is the difference between a will and a lasting power of attorney?

A will operates after your death and deals with your estate. A lasting power of attorney (LPA) operates during your lifetime if you lose mental capacity — it appoints someone to manage your finances and/or make healthcare decisions on your behalf. You need both: a will without an LPA leaves you unprotected during incapacity; an LPA without a will means your estate follows the intestacy rules on death.

What is probate and when is it needed?

Probate is the legal process of administering a deceased person's estate. In most cases, the executor must obtain a Grant of Probate from the Probate Registry before they can deal with the estate's assets — for example, closing bank accounts or transferring property. Probate is not always required for small estates or assets held jointly.

What happens to an estate if there is no will?

If someone dies without a valid will, they are said to have died intestate. The intestacy rules under the Administration of Estates Act 1925 determine who inherits. Unmarried partners receive nothing. Stepchildren are excluded. The estate is divided by a statutory formula — which may not reflect the deceased's wishes at all.

Do I need a solicitor to make a will?

You are not legally required to use a solicitor to make a will in England and Wales. However, a will drafted by a qualified solicitor is less likely to be challenged, misinterpreted, or fail to achieve your intentions. DIY wills and online will-writing services frequently contain errors that only become apparent after death — when it is too late to correct them.

What is inheritance tax and how does it affect my estate?

Inheritance tax (IHT) is charged at 40% on the value of your estate above the nil-rate band (currently £325,000). An additional residence nil-rate band (currently up to £175,000) may be available if you leave your home to direct descendants. Various reliefs — including Business Property Relief and Agricultural Property Relief — can reduce the amount payable. A well-structured will and trust arrangement can significantly reduce your IHT liability.