You are currently in the wal section of the site.

No thank you, please close this banner.

Last updated:
07/11/2017

What are discretionary trusts?

  1. Overview
  2. How do I make a will?
  3. What if my relative inherits a lump sum?
  4. What are discretionary trusts?
  5. Who specialises in trusts and mental illness?
  6. How can I find a solicitor?
  7. Next Steps

There are different types of trusts. A discretionary trust is one type of trust you might find useful for your relative. It means that:

  • Your relative does not get their inheritance paid directly to them when you die,
  • Your money and assets will pass to other people, called ‘trustees’, and
  • The trustees hold the money and assets on trust for your relative.

You can choose who you would like to be a trustee. It is important to choose someone you think is reliable.

You can choose who you would like to be a trustee. It is important to choose someone you think is reliable.

The trustees will decide whether or not to give your relative money. You can give the trustees instructions setting out when you expect them to give your relative money. But they can decide not to - this is why the trust is called ‘discretionary’.

What are the benefits of a discretionary trust?

The potential benefits of a discretionary trust include the following:

  • Your relative will not own the money in the trust. So they will not be able to spend it quickly or unwisely,
  • The money in the trust will not reduce their entitlement to benefits or increase the amount they have to pay towards social care, and
  • You can tell the trustees what you would like the money to be used for.

What are the negatives of a discretionary trust?

The potential negatives of a discretionary trust include the following:

  • The trustees do not have to pay your relative,
  • Your relative might not get all the money in the trust, and
  • There may be some tax disadvantages, which you would need to check with your solicitor.

How do I set up a discretionary trust?

You can set up a trust by signing a trust deed. The trust deed should be drawn up by someone qualified to do so, like a solicitor.

It is important to speak to a solicitor who is experienced in dealing with wills and trusts issues. They can make sure that the discretionary trust is set up in a way that:

  • Maximises the benefits, and
  • Reduces the negatives

It is important to note that laws change. So there is no guarantee that money held in a discretionary trust will always be treated the same way in the future.

You can find out more about trusts on this government website.

Share this article

Within this subject

  1. Overview
  2. How do I make a will?
  3. What if my relative inherits a lump sum?
  4. What are discretionary trusts?
  5. Who specialises in trusts and mental illness?
  6. How can I find a solicitor?
  7. Next Steps
x

Is this article helpful to you?

Was this article helpful to you?

×
Please tell us more

For urgent help, please see Help & contacts