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When we die, we all hope that our loved ones will be looked after properly. The best way of doing this is by making a Will .
In making a Will you have the chance to put in place something known as a trust.
This is a legal arrangement that provides a way to protect the assets held in it so that the beneficiaries receive all the benefits.
In setting up a trust, there are different types of trusts that can be formed. One of these is the ‘Discretionary Trust’.
What is a Discretionary Trust ?
A Discretionary Trust is a way for someone making a Will to leave assets in a trust so that it benefits family and loved ones. Unlike other trusts, it has the most flexibility as it allows trustees the freedom to decide how to distribute the assets. There is no pressure on them to distribute the assets according to any fixed instructions. Instead, they can use their discretion as to how best the trust can support the beneficiaries.
If you decide to set up a trust, it is important that you get legal and financial advice. This ensures that the Discretionary Trust is established correctly and provides the protection you want for your loved ones.
Making a will can be a challenge if your property is not easily quantifiable, or the situation of the beneficiaries is unsettled. Traditionally, wills were particular about who will inherit what asset from the estate. In such a case, there is an option of discretionary will trusts. The assets in such an agreement are given to trustees for the interests of the beneficiaries. The trustees have the freedom to decide on how the income gained and the assets in the trusts are shared between the inheritors. This article is a guide on trusts, what they are, and how they work.
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The Types Of Trusts:
There are different types of trusts including, depending on the terms of the services.
The basic trusts will cost you a minimal price, but the complex cases require the support of a registered legal specialist who may charge you for the services.
Some of the elements to consider consider when choosing the best trusts include the intended purpose, the cost and the tax rates.
There are Varying types of trusts, including:
Dare trusts are the simplest form that gives all the assets to the inheritors as long as they have attained the age of 18 year
Interest in Possession Trusts In this arrangement, the inheritor gets the income right away, but they have no right to cash or the assets that generate the revenue. The inheritor also pays income tax for the income they receive. This agreement is common in people who remarry after a divorce, but they have children from the previous marriage. The property is left under lifetime management for the partner, but it is passed to the children when the partner die.
Discretionary Trusts In this agreement, the right to decide how to distribute the assets is left to the trustee. The trustees can also make critical investment decisions on behalf of the inheritors. You can choose this type if your inheritor is not your immediate children, and it may take long before they reach the maturity age.
Mixed trusts are a combination of different features from varying types of trusts. For example, you can have half of your assets in discretionary trusts and the other half in bare trusts. This means that the beneficiary can access half the assets, including money on attaining the age of 18 years, but they will only get the income from the other half.
Vulnerable Persons Trusts This type is for vulnerable persons such as people with disabilities who are supposed to pay less tax for the income and profit gained from the trusts.
This is a trust in which all the trustees live outside the UK. The Trustees in this agreement mostly pays no tax on the income they get. Click here to see our FAQ
Trusts are a complicated subject, Including when it comes to taxation because different types of property need a different approach. There are also varying trusts that you can choose depending on your circumstances. It is always advisable to search for legal advice on the subject to avoid probate issues. You can contact registered solicitors near you or visit their office. Good news is that some of the experts will give their advice via email or can search and visit your house.