A discretionary trust is a versatile legal arrangement that can be used to protect assets, manage wealth, and provide for future generations. It involves transferring assets to a trustee, who holds them for the benefit of a specified class of beneficiaries. The trustee has discretion over how and when to distribute the trust’s income and capital.
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Key Steps to Create a Discretionary Trust:
- Choose Your Trustee:
– Professional Trustee: A corporate trustee, such as a bank or trust company, offers professional management and administration.
– Individual Trustee: A trusted individual, such as a family member or friend, can provide a more personal approach but requires careful consideration of their responsibilities and potential liabilities.
- Draft the Trust Deed:
– The trust deed is the legal document that governs the trust. It outlines the terms of the trust, including:
—The identity of the settlor (the person creating the trust)
—The identity of the trustees
—The identity of the beneficiaries
—The powers of the trustees
—The rules for distributing the trust assets
– It’s crucial to seek legal advice to ensure the trust deed is drafted correctly to achieve your desired objectives.
- Transfer Assets to the Trust:
– Once the trust deed is in place, you can transfer assets to the trust. This can be done by:
—Making a lifetime gift to the trust
—Including the trust in your will
—Transferring assets directly to the trustees
- Obtain Tax Advice:
– Discretionary trusts can have significant tax implications, including Inheritance Tax (IHT), Capital Gains Tax (CGT), and Income Tax.
– Consulting with a tax advisor can help you understand the potential tax benefits and liabilities associated with your trust.
Key Considerations for Creating a Discretionary Trust:
- Choice of Beneficiaries:
– You can specify a wide range of beneficiaries, such as your children, grandchildren, or charitable organizations.
– The trust deed can also include discretionary clauses, allowing the trustees to distribute assets to other beneficiaries as they see fit.
- Duration of the Trust:
– You can choose a fixed term for the trust, or it can continue indefinitely.
– The trust deed should specify the conditions under which the trust can be terminated.
- Trustee Powers:
– The trust deed should clearly define the powers of the trustees, including the power to invest trust assets, borrow money, and make distributions to beneficiaries.
– It’s important to consider the level of control you want to retain over the trust.
- Protection of Beneficiaries:
– The trust deed can include provisions to protect vulnerable beneficiaries, such as minors or those with special needs.
– You can appoint a protector to oversee the trustees’ actions and ensure the best interests of the beneficiaries.
Why Use a Discretionary Trust?
- Asset Protection: Trust assets can be protected from creditors and potential claims, such as those arising from divorce or bankruptcy.
- Tax Planning: Discretionary trusts can be used to reduce Inheritance Tax liabilities and optimize tax efficiency.
- Succession Planning: You can plan for the future distribution of your assets, ensuring they pass to your chosen beneficiaries.
- Family Harmony: Discretionary trusts can help to avoid family disputes over inheritance.
- Charitable Giving: You can use a discretionary trust to support charitable causes.
The Role of a Solicitor
A qualified solicitor can provide invaluable assistance throughout the process of creating and managing a discretionary trust. They can:
- Advise on the most suitable trust structure for your needs
- Draft the trust deed
- Transfer assets to the trust
- Obtain necessary tax advice
- Assist with ongoing administration and compliance
- Provide guidance on potential legal and tax issues
By seeking professional legal advice, you can ensure that your discretionary trust is set up correctly and managed effectively.
Blackstone Solicitors has a team of experienced lawyers who specialize in discretionary trusts. We can help you navigate the complexities of trust law and achieve your long-term financial goals.
How we can help
We have a proven track-record of advising upon all aspects of private client work. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.to incorporate, what kind of ownership
How to Contact Our Private Client Solicitors
It is important for you to be well informed about the issues and possible implications of dealing with trusts. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Trust solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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