Discretionary Trust

The Discretionary Trust is a very flexible form of trust. It gives your chosen trustee the discretion to provide for your chosen beneficiaries. Most importantly, discretionary trusts give you the comfort of knowing your assets will be protected according to your wishes.

What are the benefits?

Discretionary trusts are most useful where the settlor has identified a group of people they wish to benefit from but is still determining how much help and who will benefit most in the future.

As the settlor, you give the trustees discretion as to how, when, and for whose benefit some or all the capital and income are used.

Although beneficiaries or a class of beneficiaries are named in the trust deed, it is entirely the responsibility of the trustees to decide which of the potential beneficiaries is to benefit.

As the settlor, you may feel it inappropriate to leave your beneficiary in control of the funds;

This could be due to various reasons. If you have children and are concerned about the potential misuse of your assets, you can decide when they will inherit. Discretionary trust is also commonly used to distribute assets to beneficiaries who are disabled or mentally impaired, or who have money or addiction problems. Discretionary trust can also be used to protect inheritance from any third-party attacks, such as divorce settlements.

As well as being a very flexible form of Trust, Discretionary Trusts are also advantageous because the assets remain outside the beneficiaries’ estates for Inheritance tax purposes and are therefore not included in calculating means-tested benefits. Discretionary trust assets and income are also protected from distribution on divorce.

As well as being a very flexible form of Trust, Discretionary Trusts are also advantageous

 Because the assets remain outside the beneficiaries’ estates for Inheritance tax purposes and are therefore not included in calculating means-tested benefits. Trust assets and income are also protected from distribution on divorce.

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How Does It Work?

In a discretionary trust, the settlor – the person who sets up the trust – outlines general guidelines on how they wish the trust to be managed. However, the trustees have the authority to make decisions about the distribution of assets. This can be particularly useful in cases where beneficiaries’ needs may change over time, such as providing for education, health care, or other unforeseen needs.

Key Advantages

  • Flexibility: Trustees can respond to beneficiaries’ changing needs, ensuring that the trust funds are used in the most effective way possible. This flexibility can provide peace of mind to the settlor, knowing that their intentions can be met even if circumstances change.
  • Asset Protection: Assets held in a discretionary trust are safeguarded from creditors and legal claims against beneficiaries. This protection can be crucial for beneficiaries who might face financial difficulties or other challenges.
  • Tax Efficiency: By placing assets in a discretionary trust, the settlor can potentially reduce the inheritance tax liability on their estate. This can help to preserve more of the estate’s value for future generations.

Who Should Consider a Discretionary Trust?

A discretionary trust is particularly suited for those with complex family situations or where beneficiaries’ circumstances might change over time. For example, if you have children or grandchildren with varying financial needs, or if you want to provide for future generations while retaining control over how and when funds are distributed, a discretionary trust can be an excellent solution.

With our continued support, we free you from the burden of worry and provide you with peace of mind that your assets will be inherited by your loved ones when you are no longer here.

At Paradigm Wills and Legal Services, we genuinely care about educating people on the importance of making a lasting power of attorney in Leicester. In an industry often loaded with complex legal jargon and a conveyor-belt mentality, we provide a paradigm shift in how we offer our wills services. We aim to supply fresh ideas, clear and straightforward explanations, and a service tailored specifically to you. With you at the centre, we strive to make the will writing process as transparent as possible.

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Our team of seasoned legal advisors is always available to offer comprehensive support and expert advice. Whether you're looking to draft a will, establish a trust, navigate the complexities of applying for probate, or arrange for prepaid funeral plans, we've got you covered. Our goal is to simplify these processes for you, ensuring clarity and peace of mind every step of the way.

 

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