Discretionary Trust
For added peace of mind
What is it
A Discretionary Trust is an arrangement whereby your appointed Trustees hold the trust property on behalf of beneficiaries.
It is called ‘discretionary’ because your Trustees have the discretion of how much is paid, how often and to who.
The beneficiaries have no absolute right to the Trust property until the Trust comes to an end.
Why use a Discretionary Trust
Previously a large number of people used to have these in their Wills to ensure that the Nil Rate Band of both spouses are utilised. However with the recent changes, many people feel that they no longer need these type of arrangements.
Disabled child
Due to the fact that the assets put into trust are owned neither by the donor nor the beneficiary, it cannot be taken into consideration by the Local Authority when assessing entitlement to state benefits.
If the Local Authority is unable to provide care or sufficient care, the the Trust ensures that long term financial provision is made for the disabled child.
Care fees
Once your assets have been put into trust during your lifetime, they do not belong to you and therefore cannot be taken into consideration when assessing contributions towards care fees.
Crystallisation of value
When assets are put into the Trust, the value is crystallised as at the time that the Trust is created. Therefore if the value increases in value, if the value is not above the inheritance Tax threshold from the outset, there will not be any liability to Inheritance Tax.
Re-marriage of spouse
The assets are preserved if the surviving spouse re-marries, ensuring that the ultimate beneficiaries are protected. It therefore allows you to have control at the eventual destination of your assets.
Safeguard with uncertain laws
The laws are consistently changing. The Trust allows you to provide a safeguard for these uncertainties in law. (see Inheritance Tax –the changes).
