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Discretionary trust – settlor excluded

Overview

A discretionary trust provides clients with control and flexibility over how wealth is distributed.

Quick facts

  • For use with the Collective Investment Bond.
  • Available under the law of England & Wales and Scotland.
  • This is a trust where your client, the settlor, cannot be included as a beneficiary.
  • The settlor chooses their trustees. They can also appoint themselves as a trustee. We would recommend appointing an independent trustee.
  • Classes of beneficiary are defined within the deed; for example, ‘children and decedents of the settlor’. Beneficiaries not covered by the classes can be added to the trust by the settlor.
  • The trustees use their discretion to decide who may benefit from the trust and when.
  • The beneficiaries cannot demand their rights from the trustees.

Suitability

Inheritance tax

A gift into a discretionary trust would be classed as a Chargeable Lifetime Transfer it will be free from inheritance tax at outset providing it is within any available nil rate band. If you survive for 7 years after the gift then the gift should be free from any additional IHT charge. Discretionary trusts may also suffer IHT charges on payments out of the trust and at the 10 year anniversaries of the trust.

Succession planning

Often used by families for succession planning, the wide class of beneficiaries means existing and future children and grandchildren are included automatically. If the classes of beneficiaries do not include individuals who the client would want to benefit, they can be added to the trust deed at outset. It is possible to add beneficiaries once the trust has been declared in accordance with the trust deed.

The settlor

The settlor cannot benefit from the trust; therefore it would be unsuitable for a client who requires income or access to capital.

Setting up the trust

Here you will find the trust deed and trust deed completion guide. 

Discretionary trust (English law) - settlor excluded

Trust deed for the Discretionary trust - settlor excluded. English law version.

Discretionary trust - settlor excluded

English law trust deed completion guide

Please take a moment to read the completion guide before submitting the trust deed. The guide will address common concerns and queries, helping to ensure this important document is completed correctly.

English law completion guide

Discretionary trust (Scots law) - settlor excluded

Trust deed for the Discretionary trust - settlor excluded. Scots law version.

Discretionary trust - settlor excluded (Scots law)

Scots law trust deed completion guide

Please take a moment to read the completion guide before submitting the trust deed. The guide will address common concerns and queries, helping to ensure this important document is completed correctly.

Scots law completion guide

Guides and helpful documents

Technical support

A review of our trusts

View Quilter's range of trusts, with varying levels of access, flexibility and inheritance tax (IHT) efficiency to help meet the needs of your clients.

View range of trusts

Gain expert knowledge

Gain knowledge by reading helpful trust articles from our technical team supporting you on all your trust decisions.

Read trust articles