Discretionary Trusts
Maximise Flexibility & Protection with Discretionary Trusts
Elevate your Estate Planing with Discretionary Trusts, securing your assets for your family’s future.
What is a Discretionary Trust?
A Discretionary Trust offers trustees the freedom and authority to effectively utilize trust assets for the welfare of beneficiaries. By establishing a Discretionary Trust, you define a group of potential beneficiaries, such as children and/or grandchildren, who may receive income and/or capital from the trust based on the discretion of the Trustees.
This approach ensures that no individual beneficiary possesses an absolute right to the trust’s income or capital. This flexibility proves valuable, particularly when future beneficiaries, such as unborn children or grandchildren, can be included automatically as beneficiaries when the trust is established.
Who can benefit from using a Discretionary Trust?
Discretionary Trusts offer valuable benefits for various individuals and families. They are often utilized to safeguard assets and provide for specific beneficiaries. Here are some examples of who can benefit from using a Discretionary Trust:
- Secure assets for children’s and grandchildren’s future financial needs.
- Provide protection for vulnerable family members who can’t manage their finances.
- Assist spendthrift beneficiaries by controlling fund distribution.
- Support blended families by allocating assets for current and future spouses and stepchildren. (sideways disinheritance)
- Safeguard personal assets of business owners and provide for dependents.
- Enhance estate planning and tax efficiency by minimizing tax liabilities and preserving wealth for future generations.
A Discretionary Trust can help against sideways disinheritance
Sideways disinheritance is the term used when children from a previous marriage lose out on their inheritance due to their parent(s) remarrying without properly securing their estate.
Here is an example:
David and Karen are married and own a home together. David and Karen have two children, Jim and Mike.
Karen passes away without having done any form of estate planning. All of Karen’s estate, including her share of the house, is passed to David.
Later down the line, David remarries a woman named Susan.
David passes away without planning his estate.
All of David’s estate passes to Susan in its entirety, including the home.
Jim and Mike are upset about this situation and seek legal advice. Jim and Mike are told they have no claim to their late father’s estate.
This is a prime example of why Estate Planning is incredibly important. A nil-rate band discretionary would’ve completely mitigated this situation.