Keep your family home safe for generations. Wills 4 Less Residency Trust makes it simple and affordable.
When it comes to planning for the future, most people focus on writing a will-but there is another powerful legal tool that often gets overlooked: the Resident Trust If you’ve heard of this term but aren’t quite sure what it is or whether you need one, you’re not alone. Many people find the idea of trusts overwhelming or assume they’re only for the super-wealthy.
But here’s the truth: a residency trust can be one of the smartest and most protective steps you can take-not just for your own peace of mind, but for the financial wellbeing and security of your loved ones.
In this guide, we’ll walk you through what a Resident trust is, how it works, who it’s for, and why thousands of UK families are now choosing to create one alongside or instead of a traditional will.
What Exactly Is a Residency Trust?
A residency trust is a type of trust arrangement designed to establish and maintain a legal residence in a specific jurisdiction for tax, estate planning, or asset protection purposes. Put simply, it is used to ensure that your estate and assets are managed under the laws of the jurisdiction where you want to be treated as a resident.
Many people create a residency trust to:
The residency trust is structured so that you, as the settlor, transfer assets into the trust. The trust is then administered in the chosen jurisdiction, complying with its residency and tax rules.
People set up a residency trust for several deeply personal and practical reasons:
If you set up a residency trust-such as a Qualified Personal Residence Trust (QPRT)-the main goal is often to reduce estate taxes by transferring your home out of your taxable estate. However, these tax benefits depend on you outliving the trust’s set term.
If you pass away before the trust’s term expires, here’s what happens:
The Home Returns to Your Estate:
The property placed in the residency trust is treated as if it never left your estate for tax purposes. This means the full market value of the home at the time of your death is included in your estate calculation.
No Estate Tax Savings:
The primary advantage of a Resident trust is to lower your estate’s taxable value. If you don’t survive the trust term, this benefit is lost, and your estate may owe more in taxes than if you had outlived the term.
No Extra Penalties:
You’re not penalized beyond losing the tax benefit. The outcome is essentially the same as if you had never created the trust in the first place—the property is simply counted as part of your estate.
Distribution of the Property:
After your passing, the home will be distributed according to your will or, if you don’t have one, according to the laws of intestacy in your jurisdiction.
Special Case for Couples:
If the trust was created jointly by spouses and one spouse dies before the term ends, the surviving spouse’s situation may vary. If the surviving spouse outlives the trust term, some estate tax benefits might still be available.
People set up a residency trust for several deeply personal and practical reasons:
How Are Residency Trusts and Property Protection Trusts Different?
A Resident Trust is mainly used for tax planning. It controls where your assets are legally considered “resident” to reduce tax liabilities. In contrast, a Property Protection Trust aims to protect your home so it goes to your chosen beneficiaries and isn’t used up by care fees.
Resident Trusts can include various assets like savings or investments for tax benefits. Property Protection Trusts specifically focus on your property, usually your home, to keep it safe for your loved ones.
A Resident Trust determines where your assets are taxed. A Property Protection Trust ensures your property is legally protected from care costs or going to unintended people if your partner remarries after your death.
Resident Trusts reduce the tax burden on your estate. Property Protection Trusts secure your home for your family, giving them direct financial security and peace of mind.
Thinking about a residency trust is a sign you care deeply about your family’s future. Let us help you navigate the legal, financial, and emotional aspects of this important decision. Our experienced team at Will 4 Less will answer all your questions, address your concerns, and craft a plan that gives you confidence and clarity.
Contact us today to discuss whether a Resident trust is right for you. Your legacy deserves nothing less.
Will 4 Less: Affordable, Compassionate, and Expert Will Writing and Trust Services-Because Your Family’s Future Matters.
