Discretionary Trust Wills
In Bognor Regis, West Sussex
Planning for what happens to your estate after your death can be complicated, particularly if you want to protect vulnerable family members or are unsure how their circumstances might change. Discretionary Trust Wills offer a flexible way to provide for your chosen beneficiaries while giving appointed trustees control over how and when they benefit from your estate.
At MJR Solicitors, our experienced team can explain how discretionary trust wills work, the potential benefits, and the factors to consider when deciding whether one is right for you. We provide clear, practical advice to help you make informed decisions about your family's future.
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What is a discretionary trust?
A Discretionary Trust is a legally binding document and legal arrangement that allows you to leave money, property or other assets in a trust rather than passing them directly to individuals through your Will. You nominate a “class”, “group”, or “named” people to inherit your estate.
You appoint trustees to manage the trust assets and decide which beneficiaries should benefit, when they should receive money or other assets, and how much they should receive. These decisions must follow the trust terms and be made in accordance with the trustees' legal duties.
You can name specific individuals or define a wider group of potential beneficiaries, such as your children, grandchildren, or other family members. Depending on how the trust is drafted, you can even nominate a class to include people born or to be added after your death.
Unlike an outright inheritance, a discretionary trust does not give each beneficiary an automatic right to a particular share of the trust fund. Instead, the trustees decide how to distribute the assets among the eligible beneficiaries.
How does a discretionary trust will work?
A discretionary trust will sets out how some or all of your estate should be held and managed after your death. Once the relevant assets have been transferred into the trust, the appointed trustees administer them according to the Will's provisions.
As an example, you might want to leave an inheritance for your children but recognise that one is financially responsible while another struggles to manage money. Rather than dividing your estate into outright gifts, you could establish a discretionary trust that lets the trustees provide financial support based on each child's needs and circumstances.
The trustees might release funds for education, housing, living expenses, or other appropriate costs. They can also retain assets within the trust where distributing them immediately wouldn't be in a beneficiary's best interests.
This level of flexibility can be valuable when you can't predict your beneficiaries' financial, personal, or family circumstances at the time of your death. The trust can accommodate changing needs while providing a framework for managing and distributing your estate.
The key feature of this trust is “discretionary”. You're setting up a trust that can be administered in different ways.
Why make a discretionary trust will?
There are several reasons why a discretionary trust may be appropriate as part of your estate planning. Here are some of the most common reasons this type of trust may benefit your circumstances.
Protecting vulnerable beneficiaries
If you have a child or family member who is young, disabled, financially inexperienced, or otherwise vulnerable, receiving a substantial inheritance outright may not be the best option.
A discretionary trust allows trustees discretion to consider the beneficiary's needs before making payments. They can provide financial assistance when appropriate without automatically handing over the entire inheritance.
This can also be helpful where a beneficiary experiences mental health difficulties, has an addiction or is easily influenced by others. Trustees can manage the funds with these circumstances in mind, helping reduce the risk of spending the inheritance in a way that causes harm.
Supporting beneficiaries who receive means-tested benefits
An inheritance received directly by someone claiming means-tested benefits could affect their eligibility, depending on the benefit and their financial circumstances.
A discretionary trust may offer an alternative way to provide for someone while allowing trustees to decide how to provide financial support. However, assets held in a trust and payments made from it can still affect benefit entitlement under the relevant rules. Establishing a trust doesn't guarantee that it will preserve state benefits.
If this is a key concern, seek specialist advice before deciding on the most appropriate trust structure.
Providing for changing circumstances
You may not know what your family will need in the years ahead. A beneficiary could experience a divorce, financial difficulties, illness, or a change in their personal circumstances. You may also wish to provide for grandchildren, other family members, or the next generation who aren't yet born when you make your Will.
A discretionary trust gives your trustees greater flexibility to respond to these changes than an arrangement that distributes fixed shares outright. They can consider individual beneficiaries' needs as they arise, within the powers granted by the trust.
Protecting family wealth for future generations
If preserving family wealth is important to you, a discretionary trust can provide a way to manage assets for the benefit of more than one generation.
Rather than transferring the entire inheritance to one person, trustees can retain and manage trust assets for eligible beneficiaries over time and make distributions when appropriate.
This can help you establish a longer-term approach to family wealth and inheritance planning, although the trust's effectiveness will depend on its terms, investment performance, costs, and tax treatment.
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How do my trustees know what to do?
When creating a discretionary trust will, you can prepare a detailed letter of wishes to accompany your will. This document explains how you want your trustees to manage the trust and decide on beneficiaries.
You might explain that you would prefer funds to be used for education, a first home, or essential living expenses, or that a particular beneficiary may need additional support.
A letter of wishes isn't legally binding, so trustees must exercise their own discretion rather than follow it automatically. However, it can provide valuable guidance about your intentions and help trustees understand what matters most to you.
Choosing appropriate trustees is equally important. They should be trustworthy, capable of managing financial responsibilities, and willing to consider potential beneficiaries' interests fairly.
We can explain the responsibilities involved and help you consider how the terms of your discretionary trust Will should reflect your wishes.
What are the tax implications of a discretionary trust?
Discretionary trusts can have important tax implications, so you should consider potential liabilities before deciding whether to establish one. The rules depend on the trust's structure, the assets involved, and the circumstances of its creation.
Inheritance Tax
Discretionary trusts are generally subject to the relevant property regime for inheritance tax planning purposes. Depending on the circumstances, charges may arise when assets enter the trust, at each 10th anniversary and when assets leave the trust.
A trust created by a will may be treated differently from one established during your lifetime, and the available exemptions and reliefs will depend on the specific arrangements. You may also need to consider the asset's value, the available nil rate band, and any relevant transfers made in the previous seven years.
A discretionary trust is not automatically an inheritance tax-saving measure and inheritance tax charges may still apply. Assess its suitability as part of your wider estate planning.
Income Tax and Capital Gains Tax
Trust assets may generate income, including interest, rental income, dividend income or other income. Discretionary trusts have their own income tax rules, and trustees generally pay tax on taxable trust income.
Capital gains tax may also apply. Capital gains tax applies when trustees sell or transfer assets that have increased in value, although reliefs may be available in certain circumstances.
Understanding these potential liabilities can help you weigh the benefits of greater control and flexibility against the ongoing costs and responsibilities of administering the trust. We can explain the legal considerations and recommend specialist tax advice where appropriate.
Is a discretionary trust will right for you?
A discretionary trust may be worth considering if you want to provide for vulnerable beneficiaries, accommodate changing family circumstances, or retain more control over how your own estate is distributed.
It can be particularly useful when outright gifts wouldn't reflect your wishes, or when you want trustees to decide how best to support your beneficiaries in the future.
However, a discretionary trust is not suitable for every situation. Trustees must administer the trust, keep appropriate records, and consider the relevant legal and tax obligations. There may also be professional fees and ongoing administration costs.
The right approach depends on your family, your assets, and what you want to achieve. Seeking advice before preparing your will can help you decide whether a discretionary trust, another trust structure, or a simpler will best meets your needs.
Why Choose MJR Solicitors?
At MJR Solicitors, we believe estate planning advice should be straightforward and easy to understand. We know that trusts, inheritance tax, and the legal responsibilities involved can seem complicated, particularly when you're making important decisions about your family's future.
We take a no-jargon approach, explaining your options clearly and helping you understand the implications before you decide how to proceed. Whether you want to provide for a vulnerable family member, protect family wealth, or plan for when circumstances change over time, we'll take the time to understand your priorities.
If you're looking for discretionary trust solicitors in Bognor Regis or across West Sussex, we can help you explore your options and establish whether a discretionary trust will is appropriate for your circumstances.
Discuss your discretionary trust will
A carefully prepared will can help you provide for the people who matter to you while giving you greater control over how your estate is managed and distributed.
Contact MJR Solicitors to discuss your requirements and arrange an initial consultation.
Discretionary Trust Wills from £450 plus VAT per will. Severance of tenancy from £150 plus VAT. Please contact us so we can confirm our latest fees and any current offers.
For more information on our Will services or to arrange an appointment, contact us online or by phone today for an initial consultation.
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