The common feature is that the income and capital of these trusts is distributed at the trustees’ discretion to any one or more of the class of beneficiaries. Under a discretionary trust, the beneficiaries have no automatic right to receive any of the trust income or capital, and have no legal entitlements under the terms of the trust. The trustees might even decide, for a time, to not make any distributions, and instead accumulate the income in the trust for future use.
 
For this reason, a discretionary trust is the most flexible form of trust.

There are now only two main kinds of Discretionary Trust, these are:
 A General Discretionary Trust
 A Charitable Trust

A General Discretionary Trust

This trust may suit you if you have identified a particular group of people you want to benefit but you are unsure which of them, in the future, will need help or in what proportions.

For example, as a grandparent you might like to set aside capital for your grandchildren – including those who may be born later, even after your death. Some of them might be more in need than others and family and financial circumstances could change from year to year.

Being a beneficiary of a Discretionary Trust gives no entitlement to receive anything from the trust. Who receives capital advances or the income arising is entirely at the trustees’ discretion.

With regards to tax efficiency, you, as settlor, and your spouse must be excluded from all benefit otherwise the capital will still be regarded as yours for most tax purposes as if you had never created the trust.

A Charitable Trust

Can be created in your lifetime or in your Will and can receive unlimited assets, all of which can be free of all forms of taxation.

What are the tax implications?

A discretionary trust could be liable to income tax, capital gains tax and or inheritance tax.

To discuss a discretionary trust or the tax implications please call us today on……

If you have any queries regarding this please contact Luke Summerford (Client Manager) on 01323 431200 or email on luke.summerford@plummer-parsons.co.uk

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