Put simply, a Precatory Trust is a way in which you can leave a sum of money to an individual (usually your child or grandchild), but specify exactly how you want that money to be spent.
This is a great way of leaving money to someone so that it has a valuable purpose, whether that purpose is to fund the deposit on a house or to pay university fees.
A Precatory Trust doesn’t just apply to money, however. You can also use it to dictate who should receive what particular items, using a letter of wishes to say what you’re leaving to whom and why. This can be changed regularly, without actually changing the content of your Will.
Often, a Precatory Trust will offer benefits in relation to Inheritance Tax liability and Gift Aid tax.
Care must be taken when preparing a letter of wishes, so that the wording is in no way ambiguous and your express wishes are clear. You should indicate that you definitely want to create a trust, name the asset you want to distribute and state who to and why.