Discretionary Trust
It may be that when someone makes their Will they are not sure what their circumstances will be when they die and do not know whether long-term care or Inheritance Tax will be their priority (or even if a chosen Beneficiary will be disabled). The Discretionary Trust covers this situation. One of the Trustees will be the spouse or partner of the Testator. The terms of the Trust give the Trustees 2 years to decide who, from the listed Beneficiaries, should benefit from the deceased’s Estate. This can include setting up further trusts. This flexibility within a discretionary trust works well for the testator and gives beneficiaries greater protection. Eg Generational inheritance Tax and creditors.
With a discretionary trust the Beneficiaries can be a wide range of people but the Testator wants the Trustees to decide who should benefit and when. There may be certain criteria with which a potential Beneficiary must comply before the Trustees can award him/her any benefit (e.g. coming off drugs).
There are no Inheritance Tax advantages to Discretionary Will Trusts and a Discretionary Trust set up on death, it is treated like any other bequest and may be subject to Inheritance Tax at 40%.
It is usual with a Discretionary Will Trusts for the Testator to write a Memorandum of Wishes to his Trustees outlining how they would like them to act. The Memorandum of wishes is not legally binding but serves as a guide as to how they should act.
Discretionary Will Trusts and Memoranda of Wishes are used in Sharia Law compliant Wills.
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