Ashby de la Zouch

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Tamworth

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Discretionary Trust Wills

 

What is a Discretionary Trust?

 

A Discretionary Trust is a type of trust that gives flexibility to the chosen trustees. Instead of making decisions when the Will is made, choices about who inherits what are deferred until after the death and are then taken by the chosen trustees. This gives flexibility to the trustees who can respond to the circumstances at the relevant time. All income and capital held in the Trust are distributed completely at the discretion of the trustees. The Trust includes a list of people who could potentially benefit, and the trustees then decide what assets to pass on to which beneficiaries.

 

  • The list of possible beneficiaries can include children or grandchildren who have not yet been born.

 

How do Discretionary Trusts work?

 

The trustees will consider the life circumstances of the beneficiaries. For example if they are at risk of suffering from addiction then it may not be beneficial for them to inherit large sums of money. If the beneficiary is not good at handling their finances, the trustees could choose to give them a monthly or annual income rather than a lump sum. The trustees have the ability to respond to changes in the beneficiary’s circumstances by making different choices as time goes on.

 

The trustees can also consider the tax rules at the time, and can make the most tax-efficient decisions by responding to any changes in the rules that have taken place since the Will was made.

 

What are the benefits of Discretionary Trusts?

 

Discretionary Trusts can be very useful for protecting those who may be vulnerable or who can’t manage their own finances. If a beneficiary has an illness or a disability that affects their capacity, assets held in trust for them can be used for their benefit without them becoming the legal owner of the assets. The trustees can use the trust fund to provide for the needs of the beneficiary.

 

When making a discretionary trust, it is important to choose trustees who you feel will respect your wishes. You can also leave a detailed letter to guide them in their decision-making.

 

Find out more about Wills here.

Find out more about Wills, Trusts and Probate here.

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