Call Trudy Rogers on 01635 569670 | Email: info@rogers-legal.co.uk

Discretionary Trusts

A discretionary trust is a way of putting assets into a trust and thereby under the control of the Trustees but without deciding the final destination of the assets.

Discretionary trusts can last up to 125 years, but can be ended before this date. The creator of the trust (the ‘Settlor’) can usually add beneficiaries to the trust if the document provides this power. This gives the Settlor and the Trustees maximum flexibility as to who should benefit from the trust and how they should benefit.

Ideally the trust document will be drafted with maximum flexibility. This allows the Trustees absolute discretion to deal with the trust assets. The Settlor can create a letter of wishes to give the Trustees some direction as to his or her wishes. The letter of wishes can be private between the Settlor and the Trustees or it can be an open communication that can be read by the beneficiaries.

Discretionary Trusts are taxed under the relevant property regime and as such they have their ‘own’ tax regime for income tax and capital gains tax. It is important to consider the taxation of the trust assets and the tax regime of the beneficiaries when putting assets into trust as this will be relevant for the future. The potential inheritance tax that is payable on a discretionary trust every 10 years or upon assets leaving the trust will depend upon the number of trusts created by the Settlor and how the inheritance tax allowance for the trust is distributed between the several trusts.

If you are a trustee, a beneficiary or thinking of setting up a trust, please contact Trudy Rogers on 01635 569670 or Trudy.Rogers@rogers-legal.co.uk