Discretionary Trusts

Having a Discretionary Trust in your Will means assets can be directed into it on your death for the potential benefit of any number of beneficiaries you choose.

Your estate can be paid in any amounts to any of the potential beneficiaries at the trustees’ discretion. This means that nobody has an absolute right to benefit from the trust, so this can be useful for example, where a beneficiary has an impending divorce (the trust may protect their inheritance from being part of a divorce settlement) or bankruptcy (the trust may protect their inheritance until such time as the bankrupt person has been discharged) or the beneficiary is in receipt of means-tested benefits (the trust can protect their inheritance from being assessed as part of their entitlement to benefits). In some cases a Disabled Discretionary Trust may be more appropriate.

A more straightforward use for a Discretionary Trust could be where you may make future gifts to, for example your children, during your lifetime and so are unsure in what proportions you might want your estate to pass, to each of them on your death. Perhaps you would like to give your trustees flexibility to make those decisions at the time by taking into account a letter of wishes you might write to them. Another type of Discretionary Trust may be useful to mitigate inheritance tax where a couple are unmarried and do not have the more favourable tax position that married couples and civil partners do.