With family dynamics and relationships becoming increasingly complex and a rise in challenges to Wills, people are looking for solutions when estate planning and making a Will. A discretionary trust may be the best flexible option for you and your family.
Contact our team today to find out how we can help you.
What is a discretionary trust in a Will?
If you include a discretionary trust in your Will, you are placing all or a proportion of your estate into a trust to be administered by your appointed trustees. In the Will you can set out:
- The extent of the powers of your trustees. For example, whether they have to power to advance capital or income to a beneficiary.
- The class of potential beneficiaries. The beneficiaries can include loved ones and current and future family members. For example, additional grandchildren. You could also add a chosen charity or charities as a potential beneficiaries.
Why place all or part of your estate in a discretionary trust in your Will?
There are many reasons why your preferred means of estate planning may be a discretionary trust in your Will. A discretionary trust provides flexibility in times of changing family dynamics. Your trustees can exercise their discretion to advance capital or income to beneficiaries in the most tax-efficient manner. For example, if:
- You are concerned about leaving your estate directly to your children as they are at threat of bankruptcy proceedings or they are going through a family dispute, such as divorce proceedings.
- You are worried that a relative may not be able to manage a large inheritance because of their age or personal circumstances.
- You want to make sure your Will is flexible enough to provide for your relatives who are in need of a legacy rather than those who are financially well established. For example, children from a second relationship may be a lot younger than children from a first marriage and they may therefore have greater needs.
Who manages a discretionary trust in a Will?
The trust is managed by the trustees appointed in your Will. The Will details the powers of the trustees, but the Will can be supplemented by a separate and private letter of wishes to your trustees explaining how and in what circumstances you would like them to exercise their discretion to advance capital or income to your beneficiaries.
If your family circumstances change then you can update your letter of wishes. You do not necessarily need to change your Will unless you want to change your trustees or the discretionary class of beneficiaries named in your Will. For example, you may want to add a new partner or their children as potential beneficiaries to the discretionary trust and also give your trustees additional guidance in a new letter of wishes.
Estate planning solicitors can help you make a Will that includes a discretionary trust and probate solicitors can support your trustees in administering the discretionary trust.