Discretionary trust wills allow you to provide for your children and for your surviving partner or spouse while taking advantage of the inheritance tax nil-rate band to lighten the tax burden on your estate. Normally, you might want to use both your and your spouse's nil-rate bands (currently £312,000) by bestowing a sum equal to the nil-rate band to your children on death, with the rest transferred to your spouse and thus exempt from IHT. In turn, on your spouse's death, the second estate also benefits from a nil-rate band when distributing the inheritance to your children, resulting in up to £600,000 of assets being free of IHT.
However, this can cause a problem for your surviving spouse as they may lose access to the assets that you grant to your children in your will, as well as lacking the income from said assets. This can also be a problem with jointly-owned property used as a primary residence.
Discretionary trust wills help get around this problem and to provide for both spouse or partner and also children:
- Rather than a nil-rate band sum being bestowed on children, the sum is put into a discretionary trust fund with specific beneficiaries including the children and surviving partner.
- Your spouse or civil partner can then continue to draw on the income and assets of the trust fund, without it actually becoming part of their estate (and thus subject to IHT when they pass away).
- Your children (or other chosen beneficiaries) will also benefit from the fund, in particular by it being exempt from IHT after both parents have passed away.
For discretionary trust wills and other inheritance tax issues and concerns, take advantage of a free, no-obligation first consultation that is being offered through our website by professionally qualified UK financial consultants. You just need to fill out the online enquiry form we provide, and we will put you in touch with these experts who can help you with inheritance tax matters.