Discretionary trusts

How to set up a discretionary trust? What is a bare trustee? They can also be used where a testator’s wish is for there to be flexibility as to how his or her income or capital is used or where a beneficiary is not capable or responsible enough to look after their own financial affairs.

As well as being flexible, they have proved a popular method of estate planning because assets remain outside the beneficiaries’ estates for Inheritance Tax purposes, and are not included in any calculation for means-tested benefits. This comes at a cost, though, as Bernadette Lewis, financial planning manager at Scottish Widows, explains: ‘The price for this control and flexibility is that these trusts come under complex inheritance tax.

First, the trustees usually have the power to determine which beneficiaries (from within the class) will receive payments from the trust. Secon trustees can select the amount of trust property that the beneficiary receives. Although most discretionary trusts allow both types of discretion, either can be allowed on its own.

Two or more trustees manage the assets held in the trust for a number of potential beneficiaries. The discretionary trusts mean that during the trust period (typically 1years from the testator’s death) the trustees have discretion over how the assets in the trust and their income are distributed amongst the. These are where the trustees can make certain decisions about how to use the trust income, and sometimes the capital.

Depending on the trust dee trustees can decide: what.

You decide who the potential Beneficiaries of this Trust will be. This can be useful for estate planning, and save assets from being depleted unnecessarily. Our solicitors are experienced at setting up and administering discretionary trusts. Here we’ve answered some common questions about them. You hand over the assets to the trust and stipulate how you would like them to be used for the beneficiaries.

Crucially, the trustees are free to act at their own discretion. The new property IHT. An arrangement whereby property is set aside with directions that it be used for the benefit of another, the beneficiary, and which provides that the trustee (one appointed or required by law to administer the property) has the right to accumulate, rather than pay out to the beneficiary, the annual income generated by the property or a portion of the property itself. Discretionary gift trusts.

Protection Gift Trusts – Absolute Trust Pack WHAT ARE THE IMPORTANT DOCUMENTS? The settlor and the trustees must sign it. Because the trust assets are not included in the taxable estate of any of the beneficiaries, the trust itself will be assessed to IHT every years.

This is known as the ‘periodic’, or ‘principal’ charge. For example, if the settlor’s children were already wealthy and had their own inheritance tax (IHT) liability, the trustees may decide to skip the children and aim to help the grandchildren or even great grandchildren in the future. Accumulation or discretionary trusts. The main thing when using a.

Trustees are responsible for paying tax on income received by accumulation or discretionary trusts. The first £0is taxed at the standard rate. The beneficiaries do not have any entitlement to the trust fund thus it does not form part of their estate on divorce, bankruptcy or death.

Due to this flexibility the trusts are possibly subject to an entry charge, a ten yearly charge and an exit charge. Sometimes discretionary trusts are referred to as settlements or relevant property trusts. It can be the case that a client wishes to avoid Intestacy, but is uncertain on the exact distribution of the estate. A discretionary trust of Residue could therefore be included naming all the potential beneficiaries as they wish and a.