Discretionary Trust Will

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Unfortunately it is sometimes necessary to control legacies passing to certain beneficiaries in order to protect them as well as their inheritance.

Such situations could include a beneficiary who has learning difficulties or is in some way disabled, beneficiaries who are on long term benefits, those with addictions and beneficiaries who are experiencing marital problems. 

By passing an inheritance into a discretionary trust the beneficiary concerned has no absolute right to their inheritance.  It is held by the trustees for the benefit of a number of beneficiaries and the trustees then use their discretion as to who should or should not benefit.  It is therefore necessary to name more than one beneficiary in the trust clause.  Your wishes concerning the distribution of the trust fund can be set out in the Letter of Wishes.  Should the vulnerable beneficiary’s circumstances change, the trustees will have the power to release the whole of the trust fund to him/her at their discretion. 

Beneficiaries are named as a ‘class’ ie your children or grandchildren and your Letter of Wishes would name the vulnerable beneficiary as the principal beneficiary.  In the event that the vulnerable beneficiary died, the trust fund would be distributed outright to the other beneficiaries named (these are the default beneficiaries).

None of the beneficiaries are entitled outright to any of the trust fund – they merely have a ‘hope’ value and therefore there is no detrimental effect on any benefits being claimed.  If a vulnerable beneficiary on benefits needed something, for example a car or a holiday, the trustees can use the trust fund to pay for this directly so the money would not go into the vulnerable beneficiary’s bank account. 

In the circumstances of a marital breakdown, the trustees can hold the trust fund until such time as the financial settlement has been agreed and the Consent Order signed and ratified by the Court and can then choose to release the fund if appropriate.

Sadly, some beneficiaries suffer from gambling, alcohol or drug addictions and it could be considered dangerous to release funds to them.  By placing that person’s share of your estate into a discretionary trust, the trustees can choose to release funds or not depending upon the individual’s circumstances at the time.  Funds could be released, as an example, to buy a property for the individual (owned by the trustees for occupation by the beneficiary) or could pay for medical treatment for that person.