What is a Dis­cre­tion­ary Will Trust?

A Dis­cre­tion­ary Will Trust  is a type of Will that allows you to leave your assets to a group of people, known as be­ne­fi­ciar­ies, and give your trust­ees the power to decide how and when those assets are dis­trib­uted.

This gives you a lot of flex­ib­il­ity in how you want your estate to be handled after you die.

💡 Many are look­ing for to write a Dis­cre­tion­ary Trust Will. However, the cor­rect term is Dis­cre­tion­ary Will Trust.

How Does a Dis­cre­tion­ary Will Trust Work?

When you create a Dis­cre­tion­ary Will Trust, you will need to ap­point one or more trust­ees. The trust­ees will be re­spons­ible for man­aging the trust assets and dis­trib­uting them to the be­ne­fi­ciar­ies ac­cording to your wishes.

In your Will, you will need to spe­cify who the be­ne­fi­ciar­ies are and what assets you want to be in­cluded in the trust. You can also give your trust­ees spe­cif­ic in­struc­tions on how you want the trust assets to be dis­trib­uted.

For ex­ample, you might want them to dis­tribute the assets equally among the be­ne­fi­ciar­ies, or you might want them to dis­tribute the assets based on the be­ne­fi­ciar­ies' needs.

Read more: How Much Does It Cost to Make a Will?

A Simple Will or a Dis­cre­tion­ary Will Trust?

When it comes to estate plan­ning, un­der­stand­ing the type of Will that best suits your needs is cru­cial.

A Simple Will is a straight­for­ward legal doc­u­ment that out­lines how your assets and prop­er­ties will be dis­trib­uted after your death. It can also in­clude pro­vi­sions for the care of minor chil­dren and the ap­point­ment of ex­ecut­ors.

On the flip side, a Dis­cre­tion­ary Will Trust is a more com­plex type of Will that sets up a trust upon your death, provid­ing trust­ees with the dis­cre­tion to dis­tribute assets among a spe­cified group of be­ne­fi­ciar­ies.

The primary ad­vantage of a Simple Will is its straight­for­ward­ness; what you spe­cify is what gets done. However, it offers lim­ited flex­ib­il­ity and op­por­tun­it­ies for tax plan­ning. A Dis­cre­tion­ary Will Trust, while more com­plex to set up, offers greater flex­ib­il­ity in how assets can be dis­trib­uted, al­low­ing for changes in cir­cum­stances or needs of the be­ne­fi­ciar­ies.

Moreover, assets in a Dis­cre­tion­ary Will Trust are often better pro­tec­ted against cred­it­ors and can offer po­ten­tial tax be­ne­fits. Trust­ees main­tain con­trol over the assets, provid­ing an ad­di­tion­al layer of over­sight that can be par­tic­u­larly be­ne­fi­cial if the be­ne­fi­ciar­ies are minors or not fin­an­cially savvy.

The choice between a Simple Will and a Dis­cre­tion­ary Will Trust ul­ti­mately de­pends on the com­plex­ity of your estate and your goals for your be­ne­fi­ciar­ies.

Dis­cre­tion­ary Will Trust and Simple Will Com­pared

💡 Con­sult with legal and fin­an­cial ad­visors to make the best de­cision tail­ored to your in­di­vidual needs.

Read more: Writ­ing a will in the UK?

Main Be­ne­fits of a Dis­cre­tion­ary Will Trust (DWT)

There are a number of be­ne­fits to using a Dis­cre­tion­ary Trust Will, (DWT) in­clud­ing: flex­ib­il­ity, tax be­ne­fits and asset pro­tec­tion.

Dis­cre­tion­ary Will Trust Brings Flex­ib­il­ity

Dis­cre­tion­ary Will Trust give you a lot of flex­ib­il­ity in how you want your estate to be handled after you die.

You can change the terms of the trust at any time, and you can give your trust­ees the power to make de­cisions based on the cir­cum­stances at the time.

Dis­cre­tion­ary Will Trust Provides Tax Be­ne­fits

DWT can be used to reduce your in­her­it­ance tax li­ab­il­ity. This is be­cause the trust assets are not owned by the be­ne­fi­ciar­ies until they are dis­trib­uted to them.

Dis­cre­tion­ary Will Pro­tects Assets

DWT can be used to pro­tect your assets from cred­it­ors and other claims. This is be­cause the trust assets are leg­ally owned by the trust­ees, not the be­ne­fi­ciar­ies.

⚠️ Cau­tiously eval­u­ate free will tem­plates found online, as a basic tem­plate may not ac­cur­ately re­flect your in­ten­tions, po­ten­tially lead­ing to dis­putes among re­l­at­ives.

Read more: The Es­sen­tial Guide to Making a Will

Who Should Con­sider Using a Dis­cre­tion­ary Will Trust?

Dis­cre­tion­ary Will Trust can be be­ne­fi­cial for a wide range of people, in­clud­ing: par­ents with minor chil­dren, vul­ner­able be­ne­fi­ciar­ies and high-net-worth in­di­vidu­als.

1) Par­ents with Minor Chil­dren

Dis­cre­tion­ary Trust Wills can be used to provide for minor chil­dren until they reach adult­hood. The trust­ees can manage the trust assets and use them to pay for the chil­dren's needs, such as edu­ca­tion and main­ten­ance.

2) Vul­ner­able Be­ne­fi­ciar­ies

Vul­ner­able be­ne­fi­ciar­ies, such as people with dis­ab­il­it­ies or mental health prob­lems, can be­ne­fit from cre­at­ing a Dis­cre­tion­ary Will Trust.

The trust­ees can manage the trust assets and use them to pay for the be­ne­fi­ciary's needs without having to give the be­ne­fi­ciary direct access to the money.

3) High-net-worth in­di­vidu­als

To reduce their in­her­it­ance tax li­ab­il­ity and pro­tect their assets.

Draw­backs of Using a Dis­cre­tion­ary Will Trust

There are a few draw­backs to using a Dis­cre­tion­ary Will Trust, in­clud­ing:

1. Com­plex­ity: Dis­cre­tion­ary Will Trust can be com­plex to set up and manage. It is im­port­ant to seek pro­fes­sion­al advice from a so­li­citor or estate plan­ner to ensure that your trust is set up cor­rectly.  
2. Cost: Set­ting up and man­aging a Dis­cre­tion­ary Trust can be ex­pens­ive. You will need to pay legal fees and the cost of ap­point­ing a trustee.  
3. Loss of Con­trol: Once you have trans­fer­red your assets to the trust, you will no longer have direct con­trol over them. The trust­ees will have the power to make de­cisions about how the assets are man­aged and dis­trib­uted.

Over­all, Dis­cre­tion­ary Will Trust can be a useful tool for estate plan­ning. However, it is im­port­ant to weigh the be­ne­fits and draw­backs before de­cid­ing whet­h­er to use a Dis­cre­tion­ary Will Trust.

Some Ad­di­tion­al Things to Keep in Mind about Dis­cre­tion­ary Will Trust

• You Can Ap­point Mul­tiple Trust­ees, and you can spe­cify how the trust­ees should make de­cisions. For ex­ample, you might want them to make de­cisions un­an­im­ously or by ma­jor­ity vote.  
• You Can Give Your Trust­ees the Power to Ap­point New Trust­ees If Ne­ces­sary
• You Can Spe­cify When the Trust Should End. For ex­ample, you might want the trust to end when all of the be­ne­fi­ciar­ies have reached a cer­tain age or when all of the trust assets have been dis­trib­uted.

If you are con­sid­er­ing using a Dis­cre­tion­ary Will Trust, it is im­port­ant to seek pro­fes­sion­al advice from a so­li­citor or estate plan­ner. They can help you to set up the trust cor­rectly and ensure that it meets your spe­cif­ic needs.

Check­list: Dis­cre­tion­ary Will Trust

How Do You Set up a Trust?

Set­ting up a Dis­cre­tion­ary Will Trust in the UK in­volves sev­er­al steps and im­port­ant con­sid­er­a­tions to ensure that it is ex­ecuted leg­ally and aligns with your in­ten­tions. Here’s a brief guide on how to set up a trust:

1. De­term­ine the Pur­pose of the Trust

Decide why you want to set up the trust. Common reas­ons in­clude asset pro­tec­tion, estate plan­ning, or man­aging funds for minors or in­di­vidu­als who can't manage their fin­ances.

2. Choose the Type of Trust

Select the type of trust you wish to es­tab­lish. The choice de­pends on your ob­ject­ives:

• Bare Trusts: All assets and income are auto­mat­ic­ally passed to the be­ne­fi­ciary when they reach 18.
• Dis­cre­tion­ary Trusts: Trust­ees have full dis­cre­tion over how much and when each be­ne­fi­ciary re­ceives.
• In­terest in Pos­ses­sion Trusts: The be­ne­fi­ciary has the right to trust income as it is gen­er­ated.
• Ac­cu­mu­la­tion and Main­ten­ance Trusts: De­signed to sup­port the be­ne­fi­ciary until a cer­tain age, al­low­ing trust­ees to ac­cu­mu­late income and main­tain assets.
• Mixed Trusts: Com­bines ele­ments of dif­fer­ent trusts, po­ten­tially al­low­ing more flex­ible ar­range­ments for mul­tiple be­ne­fi­ciar­ies with vary­ing needs.

3. Select the Trust­ees

Choose trust­ees who will manage the trust. Trust­ees can be family mem­bers, friends, or pro­fes­sion­als like law­yers. Trusts typ­ic­ally need at least two trust­ees.

4. Define the Be­ne­fi­ciar­ies

Clearly identi­fy who will be­ne­fit from the trust. Be­ne­fi­ciar­ies can be spe­cif­ic people, a family group, or even a char­ity.

5. Create the Trust Deed

Draft a trust deed. This is a legal doc­u­ment that sets out the trust's terms, in­clud­ing the trust­ees' powers, the trust’s dur­a­tion, be­ne­fi­ciary rights, and how assets are to be handled. It is ad­vis­able to have this doc­u­ment drafted or re­viewed by a so­li­citor to ensure all legal re­quire­ments are met.

6. Fund the Trust

Trans­fer assets into the trust. This can in­clude money, stocks, real estate, or other valu­able assets. The trans­fer should align with the trust's pur­pose and ensure that it has suf­fi­cient re­sources to meet its goals.

7. Re­gister the Trust (if ne­ces­sary)

Re­gister the trust with HM Revenue and Cus­toms (HMRC) if it gen­er­ates income or is liable for taxes. This is cru­cial for com­pli­ance with tax ob­lig­a­tions.

8. Manage the Trust

The trust­ees manage the trust ac­cording to the trust deed and for the be­ne­fit of the be­ne­fi­ciar­ies. They must also handle any ad­min­is­trat­ive tasks, such as ac­count­ing and tax re­turns.

Set­ting up a trust can be a com­plex pro­cess, par­tic­u­larly when sub­stan­tial assets are in­volved or if the trust struc­ture is in­tric­ate. It is often ad­vis­able to con­sult with legal and fin­an­cial pro­fes­sion­als to ensure that the trust setup meets all legal re­quire­ments and is struc­tured op­tim­ally for tax pur­poses and long-term sta­bil­ity.

Read more

• What is a Living Will?
• Con­test­ing a Will in the UK - The Basics in One Minute
• What You Should Never Put in Your Will in UK?
• Can an Ex­ecut­or of a Will be a Be­ne­fi­ciary?