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In a discretionary trust, the assets of your trust are distributed completely at the trustees’ discretion, and beneficiaries do not have an automatic right to receive the assets held within that trust. Instead, your trustees will decide when to divide the assets and how much each beneficiary will receive. This can be a useful tool as a part of your estate planning, as it can remove the possibility of reckless spending on behalf of the beneficiaries.

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Discretionary trusts allow a huge amount of power to your trustees, so it’s important that you know exactly where you stand when it comes to setting one up and what it means for your assets and beneficiaries. Often, it is best to write a detailed letter of guidance for the trustees to help them make these decisions in accordance with your wishes.

You can set up a discretionary trust during your lifetime or within a Will. If you set it up during your lifetime, you can appoint yourself as a trustee to ensure that you still have an element of control over the assets.

Who can be a beneficiary?

You can choose anyone to be a beneficiary, including:

  • Named individuals
  • Classes of people, such as grandchildren or descendants (including those not born yet)
  • A charity, or a number of charities
  • Other organisations, such as companies or sports clubs
  • It is rarely advisable that you or a spouse are named as beneficiaries of a trust

Can a trustee be a beneficiary?

Yes, although in the interests of the trust, it’s good practice to ensure:

  • There’s no conflict of interest between someone’s role as a trustee and their position as beneficiary
  • At least one trustee is a non-beneficiary

Discretionary trusts place a lot of power in the hands of the trustees. For this reason, it’s important to make sure there’s at least one trustee who doesn’t have a financial interest in the trust.

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What are the benefits of a discretionary trust?

With careful planning, discretionary trusts can be tailored to suit the needs of you and your family and benefit your overall estate. They are valuable as a way to protect assets for beneficiaries who don’t have the ability to manage their own funds. These might be:

  • Children
  • So that family assets are protected against third parties e.g. divorce/bankruptcy
  • Those who have an illness or disability that affects their capacity
  • Those who might make poor life choices or addictions

How can Jackson Lees help?

We have considerable experience in both creating and administering trusts. The services we offer include:

  • Making your trust as tax efficient as possible
  • Advising on any legal implications
  • Keeping you up to date with relevant changes to tax laws
  • Dealing with all aspects of compliance, such as completing the trust register
  • Preparing and submitting tax returns

We offer a comprehensive service, whatever the purpose or type of your trust. We can also help with the drafting or rewriting of your Will, and your general wealth planning for the next generation.

Call today so that we can make sure the trust fits in with the rest of your plans to keep your estate tax efficient. Our expert team of solicitors and tax advisors are on hand at our Liverpool and Wirral offices to help you get the best and most comprehensive wealth plan, leaving you to enjoy life. Call us on 0151 282 1700 or make an enquiry below.

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