| Discretionary Trust, Wills & Inheritance Tax |
| A discretionary trust[1] is a trust where the beneficiaries and/or their entitlements to the trust fund are not fixed, but are determined by the criteria set out in the trust instrument by the settlor. Where the discretionary trust is a testamentary trust, it is common for the settlor to leave a letter of wishes for the trustees to guide them as to the settlor's wishes in the exercise of their discretion. Discretionary trusts can only arise as express trusts. It is not possible for a constructive trust or a resulting trust to arise as a discretionary trust. Discretionary trusts can be discretionary in two respects. First, the trustees usually have the power to select which beneficiaries (from within the class)to which payments will be made. Second, trustees can select the amount of trust property that the beneficiary receives. Although most discretionary trusts allow both types of discretion, either can be allowed on its own. It is permissible in most legal systems for a trust to have a fixed number of beneficiaries and for the trustees to have discretion as to how much each beneficiary receives,[2] or to have a class of beneficiaries from whom they could select members, but provide that the amount to be provided is fixed.[3] Most well drafted trust instruments also provide for a power to add or exclude beneficiaries from the class;[4] this allows the trustees greater flexibility to deal with changes in circumstances (and, in particular, changes in the revenue laws of the applicable jurisdiction). |
| • BBC Online Article on How Trusts Can Protect Wealth |
| • HM Revenue & Customs - An Introduction to the Diffeent Types of Trust |
| • Wikipedia Article on Discretionary Trust |
| • Directgov Website with UK Family Trust Information |
Discretionary Trust