Discretionary Will Trusts

It is wise to look to the future and plan for the inevitable in advance – prudence in preparing your finances and estate for your death can help ensure that your loved ones are well provided for and that your legacy is distributed as you see fit.  Inheritance tax (IHT) can greatly reduce the value of the assets in your estate but there are numerous exemptions and methods of avoiding or mitigating IHT, including discretionary will trusts.

The nil-rate band for IHT is currently £312,000, and spousal exemption means that your entire estate can be transferred to a spouse or civil partner without having to pay IHT.  You could just bestow your estate on your spouse and not have to worry about tax and exemptions, however:

  • Transferring all your estate to your spouse or partner fails to take advantage of your own nil-rate band for the future inheritance of your children.  They will only benefit from a single £312,000 nil-rate band rather than the combined £600,000 of untaxed estate assets that could be achieved through both of your nil-rate bands.
  • Discretionary will trusts allow for your nil-rate band to be used to establish a £312,000 trust, while the funds put into the trust are still available to you while you live and to your spouse or partner after you have passed away.
  • When your spouse or partner passes away, your children or other beneficiaries benefit from both the discretionary will trust and your spouse's nil-rate band.

The trustees of a discretionary will trust have discretion in how to use the income of the trust, although they can be required to use the income to the benefit of specified beneficiaries.

For discretionary will trusts and other inheritance tax matters, take advantage of the free first consultation with no obligations that is on offer by filling out our online enquiry form – we'll put you in touch with qualified UK financial consultants who can then help you on tax and discretionary will trust issues.

Disclaimer: Every effort is made to keep the site accurate, however please bear in mind that tax rates are subject to change. If you require tax advice you should speak to a professional tax adviser.