Discretionary Trusts are no longer the domain of the super-rich or famous but instead are often used by individuals who wish to employ estate planning and to protect assets if circumstances change.
An accountant can advise on creating a trust, and if you live close to Tewkesbury accountants firms can be found nearby such as www.randall-payne.co.uk/services/accountancy/tewkesbury-accountants/.
What Is a Discretionary Trust?
It is a trust where the settlor gives their chosen trustees the powers to dictate what beneficiaries of the trust receive and when they do so. This means income and capital are distributed at their discretion. The advantage is the additional flexibility rather than rigorous rules set out in the trust.
Is a Discretionary Trust Subject to Taxation?
You can set one up in your lifetime or include it in a will. If it’s set up in your lifetime and you die within seven years, it may be subject to Inheritance Tax.
Both income and any capital gains generated via the trust will be subject to both Income Tax and Capital Gains Tax.
When Should This Kind of Trust Be Used?
Discretionary trusts are needed when some flexibility is required. If a bare trust is adopted, children and grandchildren aged 18 can access funds in England and Wales and at 16 in Scotland. You may think that they are not mature enough to do and so will prefer the discretionary powers enjoyed by trustees in a discretionary trust.
It allows trustees to provide financial help at crucial times, avoid conflict of interest with multiple beneficiaries and protect assets for future generations.
