The most favourable characteristic of the discretionary trust is its flexibility. An English discretionary trust can last for up to 125 years and income can be accumulated throughout the lifetime of the trust if desired.
How long does a discretionary trust last?
Discretionary trusts can run for up to 125 years, so there is plenty of scope to skip one or more generations if appropriate.
Can beneficiaries end a discretionary trust?
The beneficiaries under a discretionary trust have no ‘proprietary interest’ in the trust fund unless the trustees decide on a distribution. In some cases, if all the beneficiaries can be determined, they may be able to terminate the trust.
Does a discretionary trust avoid inheritance tax?
Discretionary will trusts are relevant property trusts and therefore can be subject to inheritance tax (IHT) charges – at outset, at every tenth anniversary and when the trustees distribute money to beneficiaries.
What’s the longest a discretionary trust can last?
A discretionary trust can last for up to 125 years. This is the maximum perpetuity period allowed by law according to the Perpetuities and Accumulations Act 2009. The reason English trusts have a maximum perpetuity period at all is because there is a general legal principal that a person cannot tie up their assets in trust indefinitely.
When do you need to register a discretionary trust?
Discretionary trusts will need to be entered on the HMRC trust register if they have income or capital gains. The trustees will need to complete a trust tax return in every year that there is trust income or gains.
Can a discretionary trust be used for a life policy?
Using a Discretionary Trust for a life policy has lots of practical and inancial beneits. For example: Inheritance Tax– It should help to ensure that any money paid out from the life policy would not be part of the estate of the person covered, helping to minimise Inheritance Tax . Tax is covered in more detail on pages 6 and 7.
When do you get taper relief from a discretionary trust?
There’s a reduction in the amount of tax payable if death occurs after three but before seven years. This is known as ‘taper’ relief. Credit is given for any lifetime tax already paid, but no reclaim is possible if this exceeds the liability on death. Discretionary trusts are ‘relevant property’ trusts.
