The Role of Discretionary Trusts in Your Will | Curtis Parkinson

The Role of Discretionary Trusts in Your Will

It’s not uncommon to set up a Discretionary Trust in your Will. This mechanism allows you to ringfence some or all of your Estate, often to support a loved one who is vulnerable or unable to manage their own affairs. Or safeguarding cash or assets for loved ones going through a divorce or a period of financial instability.

A Discretionary Trust does what it says on the tin; in that, it gives greater power – or discretion – to trustees. They decide how and when to give any capital or income set aside in the trust to the beneficiaries. This arrangement offers a high degree of flexibility and protection at the same time.

Can Anyone be a Beneficiary?

Basically, anyone can be a beneficiary. The person who creates the trust, known as a Settlor, can name an individual, or group of people, such as grandchildren and their descendants. You can also include charities and other organisations or companies you would like to support.

The Role of Trustees

As we’ve already pointed out, the trustees of a Discretionary Trust are able to exercise their judgement. They can decide what and when a beneficiary receives, so it’s vital that the trustees are people you can trust. It’s possible to choose a trustee who is also a beneficiary of your estate, but it’s good practice to make sure that you appoint at least one trustee who doesn’t stand to benefit from your estate.

Pros and Cons of Setting up A Discretionary Trust

Provision is secured for The process is more complicated

  • Children or grandchildren

  • Vulnerable relatives or someone who is mentally incapable

  • Disabled beneficiaries or those in receipt of state support because Discretionary Trust income is not means-tested

  • Beneficiaries who are financially unstable; perhaps ill, struggling to manage their affairs or going through a difficult divorce

Delivers flexibility via Trustees Trustees have greater responsibility

  • Who can make real-time adjustments according to beneficiary’s need or circumstance

  • So choice is important

  • Consider benefits of using a professional

Potential Inheritance Tax (IHT) savings Potential Inheritance Tax (IHT) pitfalls

  • When considering how best to pass on property

  • Tax reliefs, such as Agricultural Property Relief (APR) and Business Property Relief (BPR) can be fully utilised

  • IHT savings may be affected if you die within 7 years of setting up the Discretionary Trust

  • Advisable to take professional legal and financial advice to avoid investment pitfalls

Our Advice

Our specialist lawyers have considerable experience in creating and administering trusts for our clients. Above all, the most important thing is to make sure your Will fits in with your family circumstances and that it delivers peace of mind.

For further information or advice about Discretionary Trusts or Estate Planning in general, please contact us. We’re here to help.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

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