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What is the difference between a will trust and a discretionary trust?

What is the difference between a will trust and a discretionary trust?

One of the main differences between leaving an outright gift to an individual, or a gift to a Will trust where the beneficiary is entitled to the income, is that the assets in a discretionary trust are not taxed on a beneficiary’s death.

What are the disadvantages of a discretionary trust?

Disadvantages of Discretionary Trusts

  • Family Trust Distribution Tax.
  • Losses cannot be distributed.
  • Beneficiaries Lack Legal Interest in Trust Property.

How much does a discretionary trust will cost UK?

Typically, a bare trust holding cash will be around £1,000 plus VAT to set up. A lifetime discretionary trust or life interest trust designed to hold cash or investments will cost around £1,000 plus VAT to set up. A personal injury trust to protect the award of a successful claim will cost £1,700 plus VAT.

How does a discretionary trust work in a will?

A discretionary trust gives trustees the power to decide how much beneficiaries get from a trust and when they get it. All capital and income is distributed completely at their discretion. This means there’s more flexibility and assets can be protected if circumstances change for any reason.

What is better a will or a trust?

For example, a Trust can be used to avoid probate and reduce Estate Taxes, whereas a Will cannot. On the flipside, a Will can help you to provide financial security for your loved ones and enable you to pay less Inheritance Tax.

Who owns the assets in a discretionary trust?

the trustee
While discretionary trust assets are legally owned by the trustee, the trustee does not beneficially own the assets. The trustee must, however, manage and safeguard the assets for the general body of potential beneficiaries, but no beneficiary can demand an asset or income from the trustee.

What are the disadvantages of a trust will?

The major disadvantages that are associated with trusts are their perceived irrevocability, the loss of control over assets that are put into trust and their costs. In fact trusts can be made revocable, but this generally has negative consequences in respect of tax, estate duty, asset protection and stamp duty.

Do you pay inheritance tax on a discretionary trust?

Discretionary trusts are ‘relevant property’ trusts. Because the trust assets are not included in the taxable estate of any of the beneficiaries, the trust itself will be assessed to IHT every 10 years. This is known as the ‘periodic’, or ‘principal’ charge.

Is a trust better than a will UK?

Your beneficiaries will not need to go through Probate to access the assets left to them in a Trust. This means that a Court does not need to oversee the distribution of the assets, which means less stress and cost for your loved ones. A Trust also remains private, unlike a Will which becomes a public document.