When making a will there are many different types of trusts that you can create, and a discretionary trust is only one example.
A discretionary trust in your Will means that you leave your estate, or part of it, to a trust. You decide who the potential beneficiaries of this trust will be, which can include people who are not born yet.
This type of trust is a good solution if, for example, you wish to leave assets to your grandchildren however are not sure at this stage if more grandchildren will be born in the future. Those you have appointed to manage the trust are known as the trustees, and they can use their discretion to decide which of the potential beneficiaries you have named, become beneficiaries. The trustees will have complete discretion and it is for this reason it is called a discretionary trust.
A discretionary trust can also be useful if you are not sure how you want to distribute your estate. By making a discretionary trust, you pass the decision of how and when the trust will be distributed over to the trustees, who will make the decision for you.
You will specify which assets from your estate are to be included in the trust and who the potential beneficiaries will be when you set up the trust in your will.
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There are many reasons why setting up a discretionary trust can be a good idea. For example, if one of your children struggles to manage their own finances, this could make you reluctant to leave them a significant amount of money. This type of trust allows you to effectively defer their rights to the assets until the trustees feel that it is appropriate.
It is standard practice for a letter of wishes to be left alongside a discretionary trust. The letter of wishes can be used to give some guidelines for the trustees to follow such as when, and in what circumstances, you would like your beneficiaries to receive their assets. The trustees can take these wishes into consideration but are not bound by them, if they feel it is in the best interests of the beneficiaries.
Creating a discretionary trust enables you to potentially leave assets to people who:
In some situations, you can also request that a beneficiary's share is only released in certain circumstances. For instance, if your daughter has an addiction, you can say that she should only receive her inheritance if she recovers from his illness. If she does not, her share should be divided amongst your other children.
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