When you set up a Discretionary Trust, you identify a class of beneficiaries such as children and/or grandchildren who can receive capital and/or income from the trust at the discretion of the Trustees. No one beneficiary has an absolute entitlement to either income or capital.
Does a discretionary trust need more than one beneficiary?
A Discretionary Trust allows your Trustees the discretion and choice to make payments (distributions) to the potential beneficiaries (or category of beneficiaries) named within the Discretionary Trust. If you have only named one beneficiary, then this is NOT a Discretionary Trust.
Why do people use discretionary trusts?
A discretionary trust allows a person to hold onto their assets without being the legal owner of the property. This can have significant advantages. For example, if a creditor pursued a beneficiary’s assets, the trust property is generally protected because the trustee is the legal owner rather than the beneficiary.
Who are the beneficiaries of a discretionary trust?
No beneficiary has any right to any of the assets in the trust, they only have a chance that the trustees could benefit them. As the trustees have complete control over the assets held in Trust, it is advisable that the Testator writes a letter of wishes accompanying the Will to guide the trustees and inform them of any particular concerns.
How long can a discretionary trust last for?
A discretionary trust can last up to 125 years. They may be ended earlier however if the trustees distributed all the trust assets to the beneficiaries or if all the beneficiaries have died. If the value of the discretionary trust is over the NRB, exit charges and 10 year anniversary charges will apply to the trust.
Can a lifetime gift be paid into a discretionary trust?
The trustees have discretion over whether to pay out income or add it to the trust capital. They can also decide when to make capital payments to beneficiaries. Lifetime gifts into discretionary trusts are chargeable lifetime transfers (CLTs).
What does it mean to have a discretionary will?
Discretionary Wills provide that part or all of a testator’s assets are given to trustees to hold on discretionary trusts for the benefit of a number of specified beneficiaries. The discretionary trusts mean that during the trust period (typically 125 years from the testator’s death)…
