What Is A Discretionary Trust?
A Discretionary Trust something you can place into your Will leaving certain assets or money in a Trust. You then nominate Trustees to look after i.e “administer” the trust.
How do they work?
There are numerous types of trust and lots of variations on each individual trust and no two trusts are identical. For a Discretionary Trust, you nominate a “class” or “group” or “named” people to inherit your estate. You can even nominate a class to include people born or to be added after your death.
The important part to note about this trust is “Discretionary”. You are providing for a trust that can vary in how it is administered.
So why make a Trust like this?
These trusts are extremely useful if you are unsure of circumstances at your death and want to ensure your estate passes subject to certain criteria being met. Don’t think “Brewster’s millions” and it being a chance to play games, more like, a beneficiary who is a bit of a spendthrift, or, easily influenced, you may want to protect them from having control of significant amounts of money or assets and you want to protect them from the harm which can sometimes occur being given all this responsibility in one go.
How do my trustees know what to do?
You leave a “letter of wishes” with the Will outlining what you want to happen, when, where and sometimes even why. It is very important to note! Your trustees are not bound by the letter. It is an indication of how you “wish” the trust to be administered.
What protection does it offer?
There are several potential protections:-
- Young or disabled beneficiaries, may need help looking after finances/assets
- Do they receive benefits? A Lump sum could alter their ability to receive these funds and have an undesired effect of them losing state assistance and the inheritance simply dwindles and adds nothing extra
- Mental Health issues? Addiction issues? You may want to provide for a loved one who is currently suffering with an addiction, providing large funds may make that far worse, would it be better to nominate someone to help and assist them.
- As mentioned above, spendthrift or easily influenced
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